The General Framework for Liberalization and Regulation of Public Utilities in Countries of Ex- Yugoslavia

The general framework for liberalization and regulation of public utilities in countries of ex- Yugoslavia

vol. 19 I n°1 I 2017

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Network Industries Quarterly - Vol 19 - Issue 1 (March 2017) The general framework for liberalization and regulation of public utilities in countries of ex-Yugoslavia dossier aThis edition of Network Industries Quarterly aims to provide insights into the general legal fra- 3 The Legal Regime of Utility Services and Public- mework for liberalization and regulation of public utilities, notably communal services, in countries Private Partnership in Bosnia and Herzegovina - of ex-Yugoslavia. Among ex-Yugoslav countries, two are European Union (EU) Member States Zoran Vasiljević (Slovenia and Croatia), two are in the process of accession negotiations (Montenegro, Serbia), one is a candidate country (Macedonia) and one represents a potential candidate country (Bosnia and 9 The Framework for Liberalization and Regulation Herzegovina). of Public Utilities in Croatia - Frane Staničić After World War II, ex-Yugoslavia was a unique example of self-management, and a specific system of governance and societal ownership of companies, including public utilities. In the early 1990s, 13 The General Framework for Liberalization and Yugoslav disintegration and democratization coincided with economic transformation from a socia- Regulation of Public Utilities in the Republic of list market economy to a market economy. However, legacies of the past economic system are still Macedonia - Marjan Nikolov present in some aspects, albeit in some countries more than others, and influence the process of liberalization of public utilities. This process was urged by joining the EU or is still urged by EU 17 An Overview of Public Utility Services and General accession requirements. Most of the impetus for liberalization comes as a response to low invest- Legal Framework for PPPs and Concessions in ments in infrastructure, as most of these countries have reached high debt levels and therefore a Montenegro - Budimka Golubović private finance infrastructure seems to be a solution. The market liberalization agenda began to come to the front, and regulatory reform urged creation of independent regulatory agencies for state-wide 21 General Framework for Liberalization and public utilities such as electricity and gas markets. On the other side, municipal (communal) services Regulation of Public Utilities – the case of the are mainly provided by local authorities and public operators. Liberalization agenda in many of Republic of Slovenia - Aleš Ferčić these countries presupposes privatization of public undertakings, contracting out or alternatives to privatization such as Public-Private Partnerships (PPPs) and concessions, with special attention given 26 Liberalization Agenda and the General Framework to the general legal framework for PPPs and concessions in these countries. of Serbian Local Public Utility Services Regulatory The following are some of the issues the country contributions have strived to address: Regime - Tatjana Jovanić • The scope and characteristics of public undertakings providing utilities and the character of public utilities owned or regulated by local self-government units; 32 announcements • PPPs and concessions as an “alternative” to full privatization: basic overview of active projects and reference to the legal and institutional framework for PPPs and concessions; • Liberalization agenda and the main issues in regulating local public utilities (communal services); • The character of regulatory powers and challenges posed to municipalities in regulating communal services. Network Industries Quarterly | Published four times a year, contains Although all country contributions have a similar structure, the level of detail may differ, notably information about postal, telecommunications, energy, water, transportation and network industries in general. It provides original analysis, due to the existing level of development of the normative and institutional framework in a respective information and opinions on current issues. The editor establishes caps, country and different experiences in private sector involvement. After presenting the institutional headings, sub-headings, introductory abstract and inserts in articles. He also edits the articles. Opinions are the sole responsibility of the author(s). and normative setting, in the concluding remarks authors have identified the main pitfalls and pros- pects for change. Although differences exist, it seems that the volatile political situation in many Subscription | The subscription is free. Please do register at to be alerted upon publication. ding local) administration and public sector of the economy are the most important deficiencies. Letters | We do publish letters from readers. Please include a full postal Therefore, it is necessary to adjust legal and regulatory frameworks and create a stable economic address and a reference to the article under discussion. The letter will be published along with the name of the author and country of residence. environment. Local administration and business communities have to understand the concept of Send your letter (maximum 450 words) to the editor-in-chief. Letters PPPs and private finance initiatives, while policymakers and local authorities must develop adequate may be edited. plans and facilitatory structures for potential PPP projects, including capacities to initiate projects Publication director | Matthias Finger Guest editor of this issue | Tatjana Jovanić and perform cost-benefit analysis for the potential projects. Managing Editor | Nadia Bert, Mohamad Razaghi, David Kupfer, Kathryn Bouchard Guest editor of this issue: Tatjana Jovanić | [email protected] Founding editor | Matthias Finger Publisher | Chair MIR, Matthias Finger, director, EPFL-CDM, Buil- ding Odyssea, Station 5, CH-1015 Lausanne, Switzerland (phone: +41.21.693.00.02; fax: +41.21.693. 00.80; email: ; website: dossier

The Legal Regime of Utility Services and Public-Private Partnership in Bosnia and Herzegovina

Zoran Vasiljević*

The author analyzes the state regulation of utilities and public-private partnerships (PPPs) in Bosnia and Herzegovina and points to the different models of implementation of the PPP, as well as practical experiences. The conclusion is that there is a need for harmonization of regulation and the reinforce- ment of the role of supervisory authority.

General remarks each of the cantons of the FBiH have their own laws on public utilities and PPP, which are at different levels of Bosnia and Herzegovina (BiH) is a complex country alignment with the EU acquis communautaire. Thus, in whose legal nature provokes different views (federa- the FBiH only Zenica-Doboj Canton has harmonized tion, confederation, etc.). It consists of two entities, the its Law on PPP3 with the European standards. Although Republic of Srpska (RS, 49% of the country) and the there are initiatives, the FBiH has not yet passed its law, Federation of BiH (FBiH, 51% of the territory of Bosnia but the Program of economic reforms of FBiH for the and Herzegovina), with Brcko District as condominium period 2016-2018 anticipated its adoption. Also, the law of both entities. Also, the FBiH is further divided into ten does not exist at the level of the overall state. However, at cantons. Each of these territorial units (entities, District the state level, there are other laws related to the matter and cantons) has its own legislation and constitutes a sepa- of PPP, for which provisions apply in the process of esta- rate legal subsystem within BiH. The whole of the public blishing partnerships, such as the Public Procurement Act4 sector is finally complemented by local government units and Concessions Act5, which also exist at other levels of (cities and municipalities) and public enterprises. legislative power.

BiH, like other candidate countries for membership of The scope of utilities services provision and local go- the European Union (EU), has the obligation to create a vernment jurisdiction three-year program of economic reforms1. End of January 2016, the Program of Economic Reforms (ERP BiH Utility services as activities of general interest in BiH fall 2016-2018) has been adopted at the state level. In addi- within the jurisdiction of local governments6, which are tion to the macroeconomic data, it contains the overall regulated by the constitutions of the entities (eg., art. 5 program of structural reforms to improve the growth and of the Constitution of RS), and on the basis of them, the competitiveness of the country. BiH as a country of about laws on local government7. Only Brcko District, which 3.8 million inhabitants had a GDP in 2015 of about 29 operates as a unit of local government, is stated in the billion BAM. Total public spending is about 41% of GDP Constitution of BiH (art. 6/4). Independent competences (of which external debt is about 29%)2, while the unem- of the local government units, inter alia, in the area of ployment rate is between 27-28%. services include planning and providing performance of utility services: the production and supply of water, gas, Like the territorial organization of BiH, the legislation thermal energy, public transport of people in urban and relating to the issue of utilities and public-private par- suburban transport, the purification and wastewater dis- tnership (PPPs) is also dispersed. RS, Brcko District and posal, the funeral activities, maintenance, arrangement

* Zoran Vasiljević is an Assistant Professor at the Faculty of Law University of Banja Luka. He performs the activities of the Vice Dean for Academic Affairs, holds lectures in the scientific area of Business Law (Company Law, Commercial Law, Banking Law) and is the head of the study program Business Law at the second cycle of study at the Faculty of Law. He is the editor of the faculty's journal „Serbian legal thought”. He is engaged as the lecturer of Business Law at the Faculty of Economics University of Banja Luka and at the Police College Banja Luka. [email protected] 1 Stated programs have been adopted at both the state and at the entities level. RS thus recently (by the end of 2016) adopted Program of economic reforms for the period 2017-2019. See: www.narodnaskupstinars.net/?q=la/narodna-skupstina/sjednice/materijali-za-sjednice/materijali-za-21-posebnu -sjednicu-ns. rs. 2 In RS, it is planned to spend a 5.5% of the projected GDP on the local government in 2016. 3 Official gazette of Zenica-Doboj Canton, No. 6/16. 4 Official gazette of BiH, No. 39/14. 5 Official gazette of BiH, No. 32/02 and 56/04. 6 In FBiH, jurisdiction is divided between local governments and cantons. See, for example, art. 7-9 of The Communal activities Act of Canton Sarajevo, Official gazette of Canton Sarajevo, No. 14/16. 7 In FBiH in force is The Principles of Local Government Act in FBiH, Official gazette of FBiH, No. 49/06 and 51/09, and besides, each canton has its own legislation. In Republic of Srpska in 2016 was passed new Local government Act of RS, Official gazette of RS, No. 97/16.

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and equipping of public green and recreational areas, calculations and final proposal for the price of utility is de- maintenance of public traffic routes in settlements, storm termined by the independent expert body of the Canton, and other water drainage from public areas, cleaning of city or municipality, and the actual price is determined by public areas in settlements and other utility services, in the Government of the Canton or city/ municipal council. accordance with the laws on local government8. Namely, This means that public authority has even power to change the assembly of the local government may also determine the price proposed by the provider of utility service, and other utilities as activities of special public interest, if they not only to give consent. are indispensable for life and work of citizens, companies or other organizations. Similar enumeration of municipal It should be noted that for the certain services of general activities is contained in the Communal Activities Act of economic interest, the criteria for determining the price RS9 under art. 2, with some added activities such as waste may be additionally defined by lex specialis which regu- disposal from residential and business premises, mana- lates those activities, such as, for example, the distribu- gement of public spaces for car parking, maintenance of tion of electricity11. In this area, prices may depend on the public toilets, management of cable ducts for communi- status of the customer. In fact, the customers who meet cation cables and systems, marketplace activities, chimney the requirements for obtaining the status of an eligible sweep business, public lighting in urban areas and activi- customer, and have the right to purchase electricity from ties related to animal hygiene. The Communal Activities the supplier by their choice, can negotiate the price with Act of Canton Sarajevo10, in turn, adds activities of deco- the seller. Such status have, eg., "Birač" Zvornik in RS, or ration and maintenance of public clocks. Those activities "Aluminium" Mostar in the FBiH (Baltić, 2016). The spe- can be divided into activities of individual or collective cifics are also present in regulation relating to the activity utility consumption, depending on whether it is possible of water supply (Zulić, 2015). to charge them separately from each user according to the amount of actually performed utilities. Regarding the activities of the joint utility consumption, the determination of utility charges is specifically affected For the above enumerated purposes, public companies with the level of equipment of settlements with the com- in ownership of cities and municipalities (also they can munal facilities and devices of joint utility consumption, be founded at the level of several local governments) can as well as with the quality and standards of communal pro- be founded or the conduct of activities contracted out to ducts and services. Determination of the amount of utility the private business entities on the basis of PPPs, with charge is, in any case, under the jurisdiction of the public retention of the right to secure the organization and the sector body and it is a joint common solution in the laws manner of their performance, as well as supervision. The on communal activities in BiH. Local Government Act of RS under art. 39 (2) gives explicit competence to the assembly of the local government The legal nature of public utility companies to affirm the price of utilities. This is confirmed by the Communal activities Act of RS in art. 20 (3), but is also Public utility companies which local government units are emphasized in art. 6. that local government can make a establishing for the purpose of performing utility activities decision to prescribe in detail the possibility for the sub- are, by their legal nature, public companies and, provided sidized price of utilities, categories of beneficiaries and that their organizational structure is not regulated by the terms of subsidies, and in general the unit of calculation laws on communal activities, the provisions of the laws for each type of public utility and the payment method on public enterprises are applied. The basic characteristics of utility services. In any case, if the public enterprise is of public companies are that they perform activities of not given the approval for the price of the utility service general interest and that their major shareholder is an en- and thus the provision of customer service to customer tity from the public sector. Thus, according to the Public would be brought into question, the local governments Enterprises Act of the RS, public company is considered a can compensate the difference between existing and eco- legal entity established in a form of joint stock company or nomic price of utilities from their budgets. Unlike the RS a limited liability company to perform activities of general legislation, laws in the FBiH do not define that the level interest and in which basic (share) capital RS or some local of utility service price is determined by the service provi- government have a majority stake, either directly or indi- der, but merely give it the right of making the proposal. rectly12. The organizational structure of these companies, Thus, Communal Activities Act of Canton Sarajevo in art. however, differs from the general regime of the Companies 22 (5) stipulates that the validity of the utility provider’s Act RS13, so the obliged bodies are stakeholders meeting,

8 See art. 18 (2) of the Local Government Act of RS. 9 Official gazette of RS, No. 124/11. 10 Official gazette of Canton Sarajevo, No. 14/16. See art. 3. of the stated Act. 11 In addition to the law at the state level, there are laws at the entities level which establish regulators in which jurisdiction is determination of prices. 12 See art. 2 (1) of the stated Act, Official gazette of RS, No. 75/04 and 78/11. 13 Official gazette of RS, No. 127/08, 100/11 and 67/13.

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the supervisory board (which the Companies Act RS does There are, however, opposite examples. One of them is not recognize), and management (comprising the director the city of Tuzla which has won the annulment of the and executive directors). In addition to these bodies, in the Decision of the Privatization Agency of Tuzla Canton of context of the implementation of internal procedures the 2001. After 14 years the city council in Tuzla unanimously audit committee is also included (Rajčević, 2012). Thus, adopted the decision on the protection of public utilities unlike the general regime which is based on the one-tier and the need to be declared public good19. Thus, privati- system of corporate governance in the domain of public zation of five utility companies: Public Utility Company enterprises legislator still stands on the positions of the (PUC) "Water supply and sewage", PUC "Komunalac”, two-tier system, which once represented the basic solution PUC "Commemorative Center", "Market-marketplace" for all companies (according to the Law on Enterprises RS and "Central heating", was prevented. of 1998, which is no longer in force). Public-private partnership In carrying out their activities the public enterprises are subject to the risk of decreased efficiency due to the absence Local governments are often not able to independently of competition, as well as corruption, which is particularly solve problems within their scope, including utility ser- manifested through circumvention of procedures provided vices, as well as the activities of public services (Dukić by the Public Procurement Act (Avramovic, 2010). Even Mijatović and Golic, 2013), so the PPPs may represent a these reasons indicate the need for transformation, as well solution. The decision to initiate the procedure for esta- as harmonization of the legal system with the EU acquis blishing PPPs is brought by assemblies of the concerned communautaire, particularly in the area of PPP, as well as local government units, while the agreement on mutual competition law. rights, obligations and responsibilities of public partners in the process of establishing a PPP, is concluded by mayors Many utility companies are privatized in accordance with or heads of the concerned local government units, on the the privatization laws enacted on the territory of BiH. basis of prior consent given by assemblies20. The role of Thus, the Privatization of State Capital Act of RS14 has the public partner may, however, play other public sector enabled the privatization of the part of the basic capital in entities, such as the state, entities and cantons (or their the former purely state owned public enterprises. In some governments through relevant ministries), public institu- of them private subjects took over the majority share, while tions and public companies21. the entity (RS) has retained a majority stake only in companies that have been declared companies of strategic im- In any case, public partners should draft tender documen- portance. The classic example of communal activity which tation before announcement of public invitation. They is now in a 100% private property is "Marketplace"15 ltd should also prepare a study of economic feasibility prior Banja Luka. This company has originally been partially to the private partner selection procedure and apply com- privatized and after that in 2011 a company "MG Mind" petitive dialogue in stated selection process. Therefore, it is from Mrkonjic Grad took over a majority stake. By 2013 of great importance to educate participants in procedures “MG Mind” reached 90% of the share capital and bene- of preparation and implementation of PPP projects. The fited from the possibility of squeezing out the remaining commissions for the PPP in FBiH and District, as well as shareholders. Finally, “Marketplace” is transformed into a commissions for concessions, on the state, entities, canto- limited liability company16. In addition, the "MG Mind", nal and district level have the role to organize specialized through its subsidiary company "Marketplace" indirectly programs of education of public partners and other par- took over a controlling stake in another former public ticipants. Other competent bodies22 can cooperate with utility company, which now operates under the name stated commissions. "Cleanliness"17 municipal service a.d. (joint stock company) Banja Luka and is engaged in activities of street Supervision cleaning, removal of home, street and industrial waste, snow cleaning, and the like18. Accordingly, this company The realization of PPPs involves finding a compromise is, at present, regulated by the Companies Act, and not the between the two interests. On the one hand, the interest Public Enterprises Act. lies in achieving social welfare and quality of life by im-

14 Official gazette of RS, No. 24/98. 15 „Tržnica“ 16 www.trznica-bl.com/ struktura-vlasnistva.html 17 “Čistoća” 18 “Marketplace” thus has about 51% of the share capital in “Cleanliness”, while City of Banja Luka participates with only 30%. See the ownership structure at: https://www.blberza.com/Pages/issuerdata.aspx ?code=cist 19 www.ekapija.com/website/bih/company/photo Article.php?id=684732&path=dozvole_160511.jpg 20 But there are various solutions in the legislation. Thus, for example, under art. 18. of the PPP Act of RS, Official gazette of RS, No. 59/09 and 63/11, when local government unit or public institution/enterprise founded by the local government unit is a public partner, the consent should be given by the Ministry of finance and the competent ministry, while in other cases the Government of RS gives consent on conclusion of contract. 21 See determination of public partner under art. 6 (1) of the PPP Act of RS, Official gazette of RS. 22 In the case if there is any. NetworkNetwork Industries Industries newsletter Quarterly | vol.vol. 1913 || nn°3o 1 || 20142017 5 5 dossier

proving the level and quality of services of public interest, partner, entirely or mainly, is done by the end users of and on the other hand, in realizing the economic benefit public service. of its own activity (Cvetković, 2015; Cvetković, 2014). Therefore, the question of supervision over the imple- Art. 6 of this Act emphasizes that the private partner un- mentation of such projects is of great importance. In RS dertakes the obligation from the public partner and the the control is performed by the relevant ministries, the risks associated with financing and construction process, Ministry of Finance, the relevant inspection bodies and and at least one of the two key risks: the risk of availabi- the Supreme Service of the Public Sector Audit23. The le- lity of public building or demand risk. The procedure for gislative bodies of the FBiH24 and Brcko District25 provide concluding a contract consists of the identification phase the commissions for PPP (founded by the Government of a PPP project, the PPP project proposal preparation, of the FBiH Canton or the District), which also have the selection of the private partner and contracting PPP. The right to monitor the implementation of PPP projects, but public partner submits the final text of the contract for the without any special power. They only examine the reports opinion of the competent Attorney. The Act also contains and information on implementation of the PPP projects provisions on anti-corruption27. On the other hand, the and then inform the governments (of canton or district) Public-Private Partnership Act of RS opens the possibility on their findings. that the public partner may propose other types of contractual form of public-private partnerships28. It also empha- Also, the services of local government are authorized to su- sizes in art. 6 (5), as well as the Public-Private Partnership pervize PPP projects implemented at the local level. In RS, Act of Canton Sarajevo in art. 9, that the private partner this jurisdiction is stipulated by the Communal Activities may, for the purposes of conclusion, i.e., contract enfor- Act under art. 32-33, which stipulates that control over cement, establish a company with special purpose. This the implementation of regulation in the field of utility ac- company is involved exclusively in the implementation of tivities, is performed by the body of the local government the PPP project, which is the reason why it was founded. responsible for utilities. Administrative control is performed by the Ministry of Spatial Planning, Construction Accordingly, the contractual PPPs can be established on and Environment, while the communal police of the local the basis of one of the two procedures regulated by special government unit, as well as other inspections when needed laws, and those are public procurement procedure, regula- represent inspection authorities. Finally, the regulations ted by the Public Procurement Act of BiH, or concession governing consumer protection entrust public authorities procedure, regulated by the Concessions Act of BiH, and with the possibility to protect users of public utilities’ ser- separate entities and cantonal laws. Thus, the Concessions vices which are provided through the PPP, given that it is a Act of BiH provides for the Commission for Concessions service of general economic interest as defined in indicated of Bosnia and Herzegovina to act as an independent re- regulations26. gulatory body, which carries out its competence in the capacity of the Commission for Concessions BiH or in Contractual forms the capacity of the Joint Concession Commission, which performs functions and powers in relation to the grant of Two basic forms of exercizing PPP in BiH are contractual concessions which are not exclusively BiH jurisdiction or and institutional form. in the case of issues that arise in connection with the grant of concessions between BiH and / or RS. The entities, in As stated, the Public-Private Partnership Act of Zenica- turn, have their own commissions for concessions29. Doboj Canton regulates only contractual forms of partnerships, and the two models: The concession is granted to a bidder who responded to the invitation to tender, who has fulfilled all the criteria a) basic - where the legal basis is the right of construc- set out in the tender, and who has high ranking in relation tion and by which the payment of compensation to the to other tenderers, i.e. the one who is declared as the most private partner is made entirely or mainly from the bud- successful. To attract as many quality bidders, the invita- get based on the availability of public service according tions to tender are sent to a large number of addressees to agreed standards, and, if the Commission for concessions BiH requested so, it will be sent an international invitation. There is a b) special - where the legal basis is concession and by possibility that a potential bidder sends a self initiated which the payment of compensation to the private offer to competent Ministry, which then estimates whe-

23 Art. 24, the PPP Act of RS. 24 See, eg., art. 23 of the PPP Act, Official gazette of Canton Sarajevo, No. 27/11. 25 See art. 5 of the PPP Act of Brcko District BiH, Official gazette of Brcko District, No. 2/10. 26 Thus at the level of BiH is passed the Consumer Protection Act, Official gazette of BiH, No. 25/06, as well as the Act of the same name at the level of RS, Official gazette of RS, No. 6/12 and 63/14. 27 Art. 30 of the PPP Act of ZDC. 28 Art. 10 (3) of the stated Act. 29 Art. 5-6 of the stated Act. NetworkNetwork Industries Industries newsletter Quarterly | vol.vol. 1913 || nn°3o 1 || 20142017 6 6 dossier

ther there is a public interest and, in the case of a positive International” has invested in the purchase of equipment, attitude and after the authorization from the Commission and the Health Insurance Fund reimburses radiation the- for Concessions of BiH has been obtained, initiates ne- rapy to all its insured persons. According to data from the gotiations with the bidder for the grant of concession30. study on economic viability, the Fund should in this way Concluded concession contract assumes also certain status achieve cost savings of at least 6.5% (Vukovic 2014). Apart effects compared to the concessionaire in the sense that from the already completed projects, the other project he cannot transfer, directly or indirectly, more than 15% proposals in the health field are also made and waiting for of voting rights, unless he receives the approval of the implementation, such as the construction and equipping Commission. Also, he cannot perform any activity other of the Center for Cardiosurgery in a spa village Slatina in than that specified in the concession contract. the municipality of Laktaši (Komasar, 2015).

Concessions Act of RS32 stipulates under art. 7 the pos- In addition to the health sector, PPP projects have been sibility of carrying out concession on the Build-Operate- successfully implemented in other areas, such as transport Transfer (BOT) model, and allows contracting other (in this sector it is just waiting for the realization of a signi- models for the implementation of concession. Concession ficant project proposal relating to the construction of the agreements are concluded for a period not longer than highway Doboj-Vukosavlje as a part of the Corridor Vc 50 years, but can be renewed. Supervision over the im- which passes through RS), parking, street lighting, public plementation of this Act is performed by the competent garage, as well as tourism and culture. Such is the project of authorities of administration of the RS and inspection is construction of "Kamengrad- Andric's town" in Visegrad, carried out by the Department of Inspection Affairs and according to the preliminary solution of the celebrated competent inspections of local government units. film director Emir Kusturica. For the realization of this project a joint company "Andrićgrad" has been founded, Institutional form co-owned by a Emir Kusturica’s company "Lotika", the Government of the RS and the municipality of Višegrad. Unlike the Public-Private Partnership Act of the Zenica- The “Lotika” has a majority share of 51% (Vladušić 2012). Doboj Canton, other laws on PPP in BiH regulate the The town has constructed city hall, theater, museum, li- institutional form of PPP, which is based on co-ownership brary, memorial house of Ivo Andric, and other objects. between a public and private partner in a joint company The project is worth about 15 million EUR. responsible for the implementation of PPP project. The founding of such a business organization is preceded by Conclusions the conclusion of the contract of partnership, as an un- named contract of civil law (in current legislation). This, Legislation of PPP in BiH is fairly dispersed and positio- in fact, represents a phase of foundation of the company ned at different levels of alignment with the EU acquis. which is subject to the general company law regime. In this sense, there is a need for harmonization, where of great benefit could be the planned adoption of the law on Implementation in practice PPP at the level of the FBiH entity.

It should be noted that in BiH there are examples of The need to improve the quality of public services is, in implementation of PPP projects. According to its value, any case, beyond doubt, and the lack of public funds fur- in particular, project proposals from the health sector are ther emphasizes the importance of developing cooperation most successful. As the best example can be mentioned between public and private sector. the inclusion of the private health institution “Euromedic International” from the Netherlands during the formation PPPs, on the other hand, carry risks, especially with re- of Dialysis Center at the Clinical Center in Banja Luka. gards to applying the competition law and the possibility That company has been selected on the basis of the tender of creating corruptive conduct. Therefore, the competent announced by the Government of the RS in 2000. Besides supervisory authorities should have an enhanced role. the center in Banja Luka, this company has built a modern Non-punishment of illegal actions causes mistrust towards center for chemo dialysis in Bijeljina, Laktasi and East these forms of investment, which ultimately harm the Sarajevo, too, by which it provides patients the European country's economic development. The regulations alone standard of services. In cooperation with the Dutch com- must clearly emphasize the need to protect the public inte- pany, which is also one of the largest operators of health rest in the conduct and control of implementation of PPP institutions through PPP, the Centre for radiotherapy wit- projects. hin the Clinical Center of Banja Luka is also equipped, as one of the most modern in the region. “Euromedic Finally, the public sector must do more to attract investors.

30 Concession contract cannot be concluded without previous consent of the Commission, unless it is concluded with the international financial institutions whose member is BiH. 31 Official gazette of RS, No. 59/13.

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It is necessary to pay more attention to the creation of the in the Republic of Srpska (Примјена модела јавно-приватног strategy of developing PPP, especially at the local level. The партнерства у Републици Српској), Annals of business economics positive results also come with the realization of a large br. 10/2014, Banja Luka, p. 142-151; number of projects of lesser value, not just the big ones. 14. Zulić, S. Study on the best way of the administrative positioning regulatory authority in the pricing of utilities of water supply References and drainage and waste water treatment (Студија о најбољем 1. Avramović, N., Some aspects of the legal position and of the начину административног позиционирања регулаторног activity of public enterprises in the Republic of Srpska (Неки тијела у поступку утврђивања цијена комуналних услуга аспекти правног положаја и рада јавних предузећа у Републици водоснабдијевања и одводње и пречишћавања отпадних вода), Српској), Legal word no. 24/2010, Banja Luka, p. 605-614; UNDP, 2015. 2. Baltić, D., Contract of the electricity sale as a special contract for provision of services of public economic interest (Уговор о продаји електричне енергије као посебан уговор о пружању услуга од општег економског интереса), Legal word no. 47/2016, Banja Luka, p. 519-539; 3. Cvetković, P. The law on public-private partnerships (Право јавно- приватних партнерстава), Niš 2015 .; 4. Cvetković, P., Public-Private Partnership as a framework to harmonize public and private interests: methodological considerations (Јавно-приватно партнерство као оквир усклађивања јавног и приватног интереса: методолошка разматрања), the Yearbook of the Faculty of Law of the University of Banja Luka, no. 36/2014, p. 9-27; 5. Dukić-Mijatović, M., Golic, D., Institutionalization of public- private partnerships in the performance of local public services (Институционализација јавно-приватних партнерстава у вршењу локалних јавних служби), Legal word no. 36/2013, Banja Luka, p. 461-472; 6. Komosar, D., Financing of projects through the public-private partnership (Финансирање пројеката путем модела јавно- приватног партнерства), XVI International Symposium: Status and Perspectives in BiH, 28-30. May 2015, Neum, www.revicon. info/dokumenti/Neum 2015 PDF PPP / Dijana Komosar.pdf; 7. Privatization of the state capital in BiH, Transparency International BiH, Banjaluka 2009 http://www.ti-bih.org; 8. The program of economic reforms in BiH for the period 2016-2018 (ERP 2016-2018), horizon2024.org/wp-content/uploads/2016/08/ Program_ekonomskih_ reformi_za_ 2016-2018._godinu.pdf; 9. The Program of economic reforms in RS for the period 2017-2019., www.narodnaskupstinars.net/?q=la/narodna-skupstina/sjednice/ materijali-za-sjednice/ materijali-za-21-posebnu-sjednicu-ns-rs; 10. The Program of economic reforms in FBiH for the period 2016- 2018, www.fmf.gov.ba/user files / file / PER.pdf; 11. Rajčević, M., The management of public companies and capital companies under the regulations of the Republic of Srpska (Управљање јавним предузећима и друштвима капитала по прописима Републике Српске), Legal word no. 28/11, Banja Luka, p. 535-546; 12. Vladušić, Lj., Public-private partnership in function of faster economic development (Јавно-приватно партнерство у функцији бржег економског развоја), Proceedings of the Faculty of Economics in East Sarajevo, no. 6/2012, p. 387-403, www.ekofis.org/images/dokumenti/Aktivnosti/zr2012/387-403-Ljubisa Vladusic.pdf; 13. Vukovic, V., Application of the model of public-private partnership

NetworkNetwork Industries Industries newsletter Quarterly | vol.vol. 1913 || nn°3o 1 || 20142017 8 8 dossier

General Framework for Liberalization and Regulation of Public Utilities in Croatia

Frane Staničić*

The author analyzes the general framework of regulation of utilities and public-private partnerships (PPPs) framework in Croatia and gives practical examples of the existing PPP initiatives. His contribution concludes with the assessment that the volatile political situation hinders reforms of public administration, which is reflected on the public utilities system.

Background compared with the number of inhabitants of roughly 4 million34. When one makes a survey at the public sector in Croatia and compares it to the IMF’s Governments Finance As a general remark, it can be said that the size of the go- Statistics Manual (2014), an obvious conclusion follows: vernment regarding its share in Croatia’s GDP is too large Croatia’s public sector encompasses more than 60% of the and that from that a conclusion must be derived – that the GDP. Namely, public owned enterprises revenues alone central state is the most important factor in the economic make roughly 28% of all revenues of the business sector in developments and growth in Croatia. The local govern- Croatia (Vizek, 2015). The central government revenues ment makes around 7% of the GDP which is comparable were around 40% of the GDP in 2016, and those of the with other South East European (SEE) countries (NALAS, local government were around 7% of the GDP. The public 2016), which also shows a lack of decentralization and debt is around 85% of GDP at the end of 2016 and the from that a conclusion must be derived that Croatia is a persons employed in the public sector represent 23% of highly centralized state. The system of local and regional the total employed persons. However, if persons employed self-government is fragmented and not equipped to fulfill by publicly owned enterprises were to be included, this its role to the public. percentage would be significantly higher (44%)32. Public Utilities in Croatia The public sector comprises of: central government, local government, all public entities which are financed In Croatia’s legal setup of public utilities, which is pres- through the central budget (public healthcare system, pu- cribed by the Local and Regional Self-government Act35 blic education system) and Non-financial corporate sec- and the Utility Services Act36, providing public utilities tor (HEP Group, Croatia Airlines, Adriatic Oil Line etc.) (with the exception of electricity which is the obligation and Financial corporate sector (Croatian National Bank, of state owned HEP Group) is the obligation of the units Croatian Bank for Reconstruction and Development, of local self-government – municipalities and cities. Public Croatian Postal Bank) whose obligations are included into utilities include water supply, water drainage and purifi- the public debt. It should be noted that local self-govern- cation, public transportation, waste disposal, public areas ment is extremely fragmented, with 576 units of local maintenance, maintenance of non-public roads (local and regional self-government: 428 municipalities, 127 roads, streets, squares) and public lighting. In order to pro- cities, 20 counties (regional level of local self-government) vide public utilities, municipalities and cities have several and the capital – City of Zagreb33. This must of course be options regarding the way in which these services will be

* Assistant professor Frane Staničić, Ph.D., graduated from the Faculty of Law, University of Zagreb in 2006. He earned his Ph.D. degree from the University of Zagreb, Faculty of Law in 2011. He teaches Administrative law at the Faculty of law, University of Zagreb, at the Chair for Administrative Law. He also teaches several other courses: Administrative Procedural Law, Administrative Law of the Interior and Religion, Law and Society. His main points of interest are administrative procedure, administrative dispute, regulatory agencies and state-church relations, expropriation and other forms of public law deprivations of property. [email protected] 32 Izvješće: Analiza plaća u javnom i privatnom sektoru u Hrvatskoj [Report: Wage Analysis in the public and private sector], Zagreb, 2014, http://www.eizg. hr/hr-HR/Analiza-placa-u-javnom-i-privatnom-sektoru-u-Hrvatskoj-1229.aspx 33 The notion of “Local Self-Governance” is a term used in some eastern European laws, describing the local level of power, not attributed to the general state. Local Self-Governance as territorial governance has some intrinsic powers, while some powers are delegated by the central level (delegation, conferral). 34 https://uprava.gov.hr/o-ministarstvu/ustrojstvo/uprava-za-politicki-sustav-drzavnu-upravu-te-lokalnu-i-podrucnu-regionalnu-samoupravu/ lokalna-i-podrucna-regionalna-samouprava/popis-zupanija-gradova-i-opcina/846 35 Official Gazette of the Republic of Croatia no. 33/01, 60/01, 129/05, 109/07, 125/08, 36/09, 36/09, 150/11, 144/12, 19/13, 137/15. 36 Official Gazette of the Republic of Croatia no. 36/95, 70/97, 128/99, 57/00, 129/00, 59/01, 26/03, 82/04, 110/04, 178/04, 38/09, 79/09, 153/09, 49/11, 84/11, 90/11, 144/12, 94/13, 153/13, 147/14, 36/15. NetworkNetwork Industries Industries newsletter Quarterly || vol.vol. 1913 || n n°3o 1 || 20142017 96 9 dossier dossier provided. They can set up a company, public institution Liberalization agenda or its own service without legal subjectivity. Furthermore, they can give a concession or sign a special contract for There is strong opposition to the liberalization of public providing public utilities (except for water supply, water utilities, especially regarding water supply. Privatization drainage and purification, for which the Waters Act37 pres- of certain public utilities is regarded as a highly volatile cribes they must be provided by a company exclusively political question. In 2016 Croatia passed the National owned by the local municipality or city with the exception reform plan42. It does not mention privatization with the of water drainage and purification which can be provided exception of companies in which the state has a minority via concession also). Providing electricity is the obligation stake, only the improved management of public compa- of the state-owned company – the HEP group. nies is highlighted. In general, public opinion regarding concessions, PPP and privatization in the sector of public The regulatory powers regarding public utilities are va- utilities is fairly negative, which has political consequences riously prescribed in different special laws regulating dif- as the ruling elite, regardless of their political background, ferent areas. For example, if a municipality or a city chose hesitates to broaden private investments and influence in to give a concession for providing waste disposal, they are this sector. responsible to monitor the concessionaire according to the Concessions Act38, but this is also the responsibility Public Private Partnerships of the Ministry of finance because of the fact that concession incomes are partly the income of the central budget. PPP is regulated by Public-Private Partnership Act43. Municipalities also regulate the prices for waste disposal Under this Act, PPP represents a long-term contractual re- according to the Sustainable Waste Management Act39, lationship between public and private partners focused on give their approval to the prices for water services as is building and/or reconstructing public buildings in order prescribed by the Waters Act, etc. It is safe to say that local to provide public services. The private partner, through self-government has a vital role in providing and regula- the duration of the PPP, takes on the risk regarding the ting public utilities no matter the way they are provided. building process and minimally one of the following risks: The government also has an important role in establishing the risk of availability of a public building or the risk of prices for some utilities. For example, the price for electric demand. There are two models of PPP: contractual PPP in energy is determined by using the Methodology for deter- which public partner signs a contract with a special com- mining prices for calculation of electric energy40 which is pany and status PPP which is based on a joint company passed by the Croatian Energy Regulatory Agency. This which implements the PPP project. The PPP contract Agency is also responsible for a similar Methodology for must be signed for duration of minimum three years, and the prices of gas and the prices of heat energy. Additionally, maximum 40 years. The public partner has the right to the Government of the Republic of Croatia has the autho- establish the standard for services provided, payment and/ rity, under the Gas Market Act41 to determine the highest or collection of established fee and to supervise the provi- price of natural gas for households for a period of maxi- ded services. The private partner has the right to manage mum three years. the risks taken and the right to charge the service, or to pay the fee. If a public authority plans to enter into PPP, According to some authors (Primorac, 2010), there are it has to notify the Agency for investments and competiti- 167 companies which provide public utilities in Croatia, veness (Agency) regarding its intention. There is a public and are set up as publicly owned companies. Other sources authority body in Croatia whose function (among others) state that there are around 152 public companies which is to help public authorities to prepare PPP projects – the provide water supply. It is safe to say that there are several Center for Monitoring Business Activities in the Energy hundred entities which provide public utilities in Croatia. sector and Investments. This public body has been appoin- This is a result of the fragmented system of local self-go- ted as implementing body for the government PPP pro- vernment which hinders the development of public ser- gram and PPP projects. It is charged with helping public vices due to the inability of many municipalities to pro- bodies in preparing PPP and in conducting all phases in vide basic public services. PPP projects.

37 Official Gazette of the Republic of Croatia no. 153/09, 63/11, 130/11, 56/13, 14/14. 38 Official Gazette of the Republic of Croatia no. 143/12. 39 Official Gazette of the Republic of Croatia no. 94/13. 40 Official Gazette of the Republic of Croatia no. 71/16. 41 Official Gazette of the Republic of Croatia no. 28/13, 14/14. 42 Nacionalni plan reformi 2016 [National reform plan 2016], http://ec.europa.eu/europe2020/pdf/csr2016/nrp2016_croatia_hr.pdf 43 Official Gazette of the Republic of Croatia no. 78/12, 152/14.

The Agency either refuses or accepts, with the consent of took in order to improve investments and the overall in- the Ministry of Finance, the proposed PPP project. If the vestments climate in Croatia. Agency refuses the project, its decision may be challenged in front of the competent administrative court. The selec- PPP practice in Croatia tion of the private partner is then regulated by the Public Procurement Act44, and the only applicable criteria for se- There were examples of PPP in Croatia in the past, espe- lection is the economically best tender. The Agency keeps cially in road constructing, with the example of BINA records on all PPP, controls their implementation through Istria which was granted a concession to build highways the duration of the PPP, and approves any changes in the in Istria in 1995. But, the development of PPP in Croatia PPP contract. The public partner has a responsibility to started in earnest in 2007 with the construction of sports send reports to the Agency every six months regarding the halls in the form of PPP in which the private partner built implementation of the PPP. When implementing PPP, it the halls (in Varaždin and Split), and the public partner is is possible to grant a concession to the private partner. paying the lease until the contract expires and the halls be- Of course, PPP is possible through concessions. without come the property of the public partners. Other examples a special PPP contract, especially through concessions for of PPP in Croatia are reconstructions of public buildings services and concessions for works. In these concessions (schools, terminals, administrative buildings). The most the concessionaire provides the service or implements the important PPP is the construction of the new Zagreb works and is granted the right to collect fees for his services Airport which is a PPP in a form of a concession with a and/or to manage the built facilities. value of 1,420,800,000 HRK (approximately 190 million EUR). The value of PPP which are in the PPP register The concessions system is governed by the general with the Agency is 2,538,434,056 HRK (approximately Concession Act, but also by many special laws which dif- 340 million EUR). fer more or less from the Concessions Act. The concession Project name Capital worth (HRK) procedure is rather lengthy, with the obligation to publicly announce the tender, pass the concession decision in Zagreb Airport 1,420,800,000 a form of an administrative act, in order to subsequently Sports hall Varaždin 177,174,280 sign the concession contract which is an administrative School upgrade Varaždin group 1 27,628,610 contract. The decision is subject to appeal to the body School upgrade Varaždin group 5 39,685,001 which resolves appeals in the public procurement proce- School upgrade Varaždin group 4 13,939,404 dures, and the contract is, for now, subject to revision un- School upgrade Varaždin group 3 16,065,311 der the regular courts, but with the entering into force of School upgrade Varaždin group 1 and 2 31,932,259 the new Concessions Act in 2017 it will fall under the ju- School upgrade Varaždin group 3 and 4 40,560,479 risdiction of administrative courts. It should be noted that School upgrade Varaždin group 2 18,427,258 the Concessions Act which is now in force (from 2012) is not fully aligned with the acquis (Directive 2014/23/ School upgrade Varaždin group 1 49,677,685 EU of the European Parliament and of the Council of 26 Reconstruction of Varaždin’s County 8,976,983 building February 2014 on the award of concession contracts45), Bus station Osijek 120,000,000 but that will change with the forthcoming Concessions Act. Koprivnica highschool 69,566,786 Arena Split 504,000,000 It is also important to mention the Strategic Investment Total 2,538,434,056 (without Projects of the Republic of Croatia Act46 under which a VAT) 47 project, if it is characterized as a strategic one, is imple- Table 1 – contracted PPP in Croatia (1 Euro=7.6 HRK) mented faster and with less bureaucratic red tape. The Government formed a Committee for strategic investment projects which selects and approves such projects, whose There are many projects in the planning phase with the president is the vice-president of the Government of the Center worth 2,111,047,976 HRK (approximately 277 Republic of Croatia. Once granted this status, all proce- million EUR) which have been approved by the Agency dures in connection with such a project are considered to with a pending public procurement procedure in order to be urgent. This is also one of the steps the government select the private partner48.

44 Official Gazette of the Republic of Croatia no. 120/16. 45 Official Journal of the European Union, L 94/1, 28. 3. 2014. 46 Official Gazette of the Republic of Croatia no. 133/13, 152/14, 22/16. 47 http://www.aik-invest.hr/jpp/projekti/ 48 http://cei.hr/upload/2015/10/20151021_dynamic_562788a163399.png

Project name Capital worth (HRK) Rerferences Justice square Zagreb 1,350,000,000 1. Nacionalni plan reformi 2016 [National reform plan 2016], http:// Neuropsychiatric hospital Popovača 124,500,000 ec.europa.eu/europe2020/pdf/csr2016/nrp2016_croatia_hr.pdf General hospital Varaždin 240,000,000 2. NALAS. 2016. Fiscal Decentralization Indicators: http://www.na- Home for the elderly Gerovo 24,000,000 las.eu/Publications/Books/2016_FD_Report Varaždin County schools 107,000 3. Primorac, B.; Financijsko poslovanje lokalnih komunalnih trgovačkih društava [The Finances of Local Utilities Companies], Istria County & town of Poreč schools (4 145,759,900 schools) Newsletter Instituta za javne financije [Institute for public finances Town of Koprivnica schools (3 schools) 100,000,000 newsletter], 2010. 4. Vizek, M.; Poslovanje javnih poduzeća i njihov značaj za eko- Rebuilding of public lightning city of 4,160,000 Kraljevica nomsku aktivnost u Republici Hrvatskoj [Management of Public Rebuilding public lighting city of Novska 7,000,000 Companies and their Importance for Economic Activity in the Rebuilding public lighting municipality of 1,520,000 Republic of Croatia], http://www.manjiporezi.hr/poslovanje-javnih- Višnjan poduzeca-i-njihov-znacaj-za-ekonomsku-aktivnost-u-rh/ Rebuilding of public lightning city of Novi 4,194,298 Vinodolski Rebuilding public lighting municipality of 1,875,874 Kostrena Total 2,111,047,976 (without VAT) Table 2 – approved but not yet contracted PPP in Croatia49 (1 Euro=7,6 HRK)

Conclusion

PPP is not unknown in Croatia, and has a rather long history of use. However, a lot of PPP projects were not completed, or, if completed, became a source of financial problems for the public partners (especially for municipalities which realized that they cannot afford the cost of the projects). Today PPP is reserved for smaller projects than before, as can be seen from the data supra regarding the contracted PPP and the projects that are pending completion. There are also problems regarding the aforementioned fear of privatization of public utilities, especially water services which has created a somewhat hostile environment for investments, especially foreign. The government tried to put up a PPP in which highways would be given into concession to private partners, but was stopped by huge public dissent. Most privatization processes are hindered by a lack of political support, which can also be seen from the data given supra regarding the huge economic impact of the state in Croatia’s BDP. Furthermore, the political situation has been volatile in the last year and a half, which is also hindering public administration reforms and of the system of local self-government. This reform is of crucial importance in order to better the public utilities system, as it depends on the capacity of the local self-government. To conclude, there are many ways in which investments through PPP and concessions can be bettered, but that all depends on the (non) existence of political will to perform necessary reforms.

49 http://www.aik-invest.hr/jpp/projekti/

The General Framework for Liberalization and Regulation of Public Utilities in the Republic of Macedonia

Marjan Nikolov*

The author describes powers of local governments in managing communal competences and setting conditions regarding the operation of communal services. This country overview stresses the conclusion that Macedonia is facing a fiscal space both at central and local level budgets. Lack of proper needs assessment for PPPs is the result of the lack of central and local government level coordination, among other factors.

Background Public Utilities in Macedonia

The public sector in Macedonia as per the IMF’s Global Macedonian municipalities inherited experience in ma- Financial Stability indicator (GFS - IMF 2014) defini- naging the communal competencies from the Former tion incorporates: central government; local government; Yugoslavia. Since independence and the start of transition non-financial corporation sector (Electricity Generation in 1991 power has traditionally been centralized and the Company, AD ELEM and Electricity Transmission only competencies municipalities have had were in the Company, AD MEPSO) and financial corporation sec- area of communal services until 2005 even though the law tor (Macedonian Bank for Development Promotion). on local self government was enacted in 2002 the proper The central government revenues are around 31% of the local government finances came to be defined and regu- GDP in 2015 and the local government revenues are lated with the law on financing local self government in around 5.4% of the GDP in 2015. The public debt is 2004 (UNDP, 2005). around 50.6% of GDP in Q3 2016 and the employed persons in the public sector represent 23.4% of the total In accordance with article 22 of the Law on local self go- employed persons in Q3 201650. vernment municipalities have competencies in communal activities in: water supply, waste water sewage, public li- Some general observations from the public sector data in ghting, public cleaning, rain water drainage, public trans- Macedonia are that the central government and funds in portation, gas and heat supply, cemeteries management, Macedonia are around 30% of the GDP thus; the size of local roads reconstruction and construction, public par- the government measured with this indicator is relatively king, green markets management, green areas and parks, low compared to other transition countries and compared and solid waste management. to the OECD countries (Nikolov, 2009a). Further, local government in Macedonia is a bit more than 5% of the All the conditions related to the communal activities like GDP and this is comparable with the other South East financing, design, construction, maintenance and related Europe (SEE) countries but it is lower than the developed are regulated in the Law on communal activities from countries in EU (NALAS, 2016; Nikolov, 2013). Note 2012 and other proper by laws like the law on public also that the finances of the Public Utility Companies enterprises. In accordance with the Law on communal (PUC) owned by the local governments in Macedonia activities the providers of communal services are the PUC are not consolidated with the presented data. established by the municipalities and the City of Skopje

* Marjan Nikolov is a docent at the International Slavic University. He taught public finance at the local level and financing regional development at the Integrated Business Faculty in Skopje. He worked at the Economic Institute of Iceland as Junior Economist. He holds a PhD in economics from the University of Ljubljana, MSc in economics from the University of Reykjavik and BSc from the University of St Cyril and Methodius in Skopje. Dr. Nikolov is co-founder of the independent think tank Center for Economic Analyses in Skopje. Dr. Nikolov has worked as a consultant on various USAID, UNDP, DFID, World Bank projects focused on decentralization agenda in Macedonia and Western Balkans, public administration reform and public policy analysis. As an author or co-author Dr Nikolov has contributed with chapters in national and regional publications of international character and is co-author of the Manual for design and implementation of effective PPPs at local government level“, (Macedonian Association of LSG, 2008).” [email protected]

50 Source: Author’s calculations on Ministry of finance data. Macedonian GDP in 2015 was about 9 billion EUR. The population size as per the last 2002 census is around 2 million. NetworkNetwork Industries Industries newsletter Quarterly | |vol. vol. 13 19 | | n°3no 1 | 2014| 2017 1313 dossier

and the Government of the Republic of Macedonia. (PIP) 2009-2011 the total cost of the planned projects is estimated at some 2.5 billion EUR (Nikolov, 2011). PUC at the local government level are established by the Estimated capital investment needs in the area of waste municipal councils. The PUC by the Law on communal water for example in Macedonia can go up to 250 EUR services are licensed communal service providers. On the per capita on average (Becchis, 2015). Estimated invest- other hand, as per the Law on public enterprises the mana- ment needs for approximation to EU environmental legis- gement of the PUC are the Board of Directors with the lation in the sectors of urban waste, sewerage, municipal Director General and the Supervisory Board. The Board waste management (landfill and other installations) are of the Directors comprises at least 5 and at most 15 mem- around 430 million EUR (CEA, 2006). It is also men- bers and their mandate cannot be longer than 4 years. The tioned in the PIP that the government’s imperative is to Director of the PUC is appointed and can be fired by the engage foreign investments primarily through concessions, Mayor of the municipality. The Supervisory Board is com- donations, PPP, direct and joint ventures. On the other prised of 5 members appointed by the municipal council. hand, to be consistent with the period of the PIP, the Fiscal The mandate of the Supervisory Board members is 4 years strategy for the period 2011-2013 mentions the PPP in as per the law on public enterprises. the context of the local governments: “...a proper effect is expected from the initiative of the private sector in the pu- As already noted, the finances of the PUC in Macedonia blic sector through the PPP as incentive to improvement are not consolidated with the municipal public finances. of the local service quality and increase of the revenues”. Macedonia has one-tier local government with 80 municipalities and the City of Skopje as a separate local govern- Macedonia is a candidate country for integration into ment unit comprising 10 municipalities. The councils of the EU and it has to comply with the EU’s standards these municipalities established 69 PUC in Macedonia. and rules, in particular with the EU Directives on Public The municipal councils also approve the PUC annual Procurement (PP) including PPP and concessions and ful- accounts and tariff changes and also guarantee any long- fill the benchmarks for Chapter 5 of accession negotiations term loans. The recent reform was the setting of tariffs relating to PP. The PPP model attracts investments into for water services by the central regulatory body. The public infrastructure and services worldwide. However, it regulatory competencies are organized in a way of exten- continues to remain occasional rather than systematic in ding the competencies of the existing Regulatory Energy Macedonia (ReSPA, 2015). Commission with the competency of regulating the tariffs of the water services (regulated in the proper energy law51). Compliance of PPP and concession with the EU acquis

Public-Private Partnerships (PPPs) in Macedonia In Macedonia, PP law and PPP law are aligned in general with the EU acquis. The authority responsible for moni- Investment needs toring and control of PP law is the Ministry of Finance and the authority responsible for monitoring and control The investment needs in Macedonia both at central and of PPP law is the Ministry of Economy. Related to the local level government were already confirmed not only by procurement, there is a by-law adopted by the Public the World Bank PER documents from 2008 and domes- Procurement Bureau (PPB) where the criterion for the tic researchers (Nikolov, 2009b) but with citizens’ lesser most economically advantageous tender is prescribed52 as a satisfaction with the quality of public services and regio- contract award criterion. However, the recent frequent use nal misbalances (UNDP, 2009; Bartlett et al, 2010). The of the lowest price as a criterion for awarding a public pro- needs for investment are relatively high in contrast to the curement contract (including PPP/concession contract) relatively low fiscal space at the central and local govern- violates the principle of value for money (VFM). ment budgets and low domestic and foreign direct investments (FDI) in Macedonia (CEA 2016). The donors are Types of PPP contracts as per the Macedonian PPP downsizing their engagement in Macedonia, the capacity legislation to utilize the Instrument for Pre-Accession (IPA) is weak (Nikolov, 2016) and it seems that the PPP can be the ins- Depending on the means of remuneration by the public trument to settle the often contradictory goals among the partner for the provided public works and/or public ser- government, investors and consumers. vices, as well as allocation of key inherent risks, a public private partnership in Macedonia can be established, as In Macedonia, as per the last Public Investment Program per the PPP law, either as: public works concession and/

51 Related documents of the supplementing of the law and the voting in the Macedonian Assembly can be accessed here: http://sobranie.mk/materialdetails. nspx?materialId=343c7b43-61d5-4ed3-bc82-965442b6e334. 52 See the by-law at the link: http://javni-nabavki.finance.gov.mk/bjn-portal/wordpress/wp-content/uploads/METODOLOGIJA-ZA-IZRAZUVAWE-NA- KRITERIUMITE-ZA-DODELUVAWE-NA-DOGOVOROT-ZA-JAVNA-NABAVKA-VO-BODOVI1.pdf.

NetworkNetwork Industries Industries newsletter Quarterly | |vol. vol. 13 19 || n°3no 1 | |2014 2017 1414 dossier

or contract or public service concession and/or contract. concession period. Public works and services concession according to the international terminology are a concession contract, Build– Parking: Municipality of Bitola as grantor has awarded a Operate–Transfer (BOT) or Design-Build-Finance- public service concession - zone system of parking. The Operate-Transfer (DFBOT) projects i.e. user pay projects. concessionaire is obliged to acquire the spider vehicle, Public works and services contracts according to the management software system parking zone, PD devices international terminology are work contracts and service for zone system of parking, foxes, vertical and horizontal contracts i.e. authority-pay projects. signaling, "call centre" and other equipment needed for the operation of parking lots, as well as to do winter and Example of PPP in municipalities in Macedonia summer parking-marking. In return for the investment, recovering the costs of operation and achieving reasonable In Macedonia at central government level the most signifi- profit, the concessionaire is entitled to charge end-users for cant concession so far was the airport project. At the local parking services. The concessionaire pays the municipality government level, a number of public utility contracts a concession fee each year. The investment is estimated have been signed in the following areas: waste manage- at about 261,000EUR. The number of parking places is ment, zone system of public parking, public lighting and 1,679. The period of the contract is 6 years. The public par- administrative offices buildings. We illustrate examples of tner-Bitola is responsible for construction of the parking PPP projects for various sectors where the sector falls un- places. Most of the parking lots were already constructed der the competency of local government (Nikolov, 2015): and the smaller amount that needed to be constructed should be constructed by the Bitola municipality. Waste disposal: City of Skopje as a grantor awarded a concession agreement covering the reconstruction of the Administrative offices building: The Municipality of landfill "Drisla” – Skopje, including construction of new Gjorce Petrov has awarded a public works contract for the installations for the disposal of waste in accordance with construction of a municipal administrative offices building EU standards and within the investment dynamics given (municipal hall) with approximately 3,500 square meters. in the bid of the selected concessionaire. The concession is Private partner is obliged to design, finance, construct implemented as an institutional PPP, given that existing and transfer the municipal hall. The private partner on public enterprise established by the City of Skopje is trans- the other side was awarded the right to build a commer- formed into a Limited Liability Company whose founders cial building with approximately 11,500 square meters in are the City of Skopje (20% equity) and the foreign private its ownership on the land which is owned by the public partner as majority partner (80% equity). City of Skopje partner. Private partner got a 40% discount on the land is obliged to guarantee a certain amount of waste each construction fee. Implementation of this contract is in year. In the case of less amount of waste, City of Skopje process. is obliged to compensate the unrealized income from the waste disposal to the concessionaire. The investment was Conclusion estimated at about 90 million EUR and by the contract is expected for the private investor to invest 73 million EUR The need for modern infrastructure and better services of capital. The period of the contract is 35 years. is evident in Macedonia. The lack of proper fiscal space both at central and local level budgets makes the PPP an Street lighting: The Municipality of Makedonski Brod opportunity to meet citizens’ needs for better services and has awarded a concession contract for public service - to achieve value for taxpayers’ money. reconstruction, modernization and maintenance of public lighting - in the municipality of Makedonski Brod Macedonian PPP legislation is generally compatible but for a period of 10 years with an estimated value of some not fully compliant with the acquis. The specific PPP/ 270,000 EUR. The private partner is obliged to replace concession law exists where a clear definition of PPP/ existing light bulbs with new energy-saving light bulbs and concession are prescribed together with criteria for PPP to maintain them for the period of the contract but also to project approval. On the other side the PPP/concession extend the scope of the service with new lightning spots. regulations do not provide criteria for fiscal impact of The remuneration of the private partner pays the munici- PPPs assessment and the PPP/concession regulations are pality from the funds it collects from the citizens and legal not compliant with the EU (Eurostat) rules on govern- entities on behalf of the communal tax. Given that ener- ment deficit and debt. gy-saving bulbs provide electricity savings after electricity company payments and payments to the concessionaire, There is a lack of political will and champions to make the municipality should generate some income and assets the environment for PPP in Macedonia more transparent. will remain to the municipality after the expiration of the Prevalent practice is that PPP has been seen in Macedonia

as a “pocket bank’ where the public sector can take mo- 7. IMF. 2014. Government finance statistics manual. https://www.imf. ney from the private partner so that the public sector can org/external/Pubs/FT/GFS/Manual/2014/gfsfinal.pdf continue to work as usual and more, stigmatizing the pri- 8. NALAS. 2016. Fiscal Decentralisation Indicators: http://www.na- vate partner if searching for profit. las.eu/Publications/Books/2016_FD_Report 9. Nikolov M. 2009a. Budget process in Macedonia: Recent develop- Proper central and local government level coordination is ments and challenges. SSRN. https://papers.ssrn.com/sol3/papers. missing. The decentralization in Macedonia is more of a cfm?abstract_id=1443394. deconcentration than devolution type (Nikolov, 2013). 10. Nikolov M. 2009b. Discussions about the needs to intensify PPP at For example, if a municipality wants to go for a PPP for the local level. CEA Journal of Economics. Vol. 4(2). http://journal. a kindergarten, the municipality can use block transfers cea.org.mk/index.php/ceajournal/article/view/71/68 from the central government for child protection for its 11. Nikolov M. 2011. PPP experience in Macedonia. Proceedings of best use. Risk arises because if the public partner pledges the 4th International conference for entrepreneurship, innovation the block transfer to the private partner in order to achieve and regional development. http://eprints.ugd.edu.mk/10553/1/ value for money the private partner cannot employ people EIRD%202011.pdf in the new kindergarten as it must wait for ministerial 12. Nikolov M. 2013. Cost Efficiency of Municipalities in Service approval to fund new employees. Additionally, if the kin- Delivery: Does Ethnic Fragmentation Matter? Book, Lex-Localis dergarten is privately run there is a risk for fiscal oversight Publisher: http://www.lex-localis.com/index.php/LexLocalisPress/ when budgeting for the next fiscal year. The quasi devo- catalog/book/1 lution of the fiscal decentralization makes it risky and/ 13. Nikolov M. 2015. Country case study for Macedonia in working or practically impossible to exercise PPP at local level for paper “PPP in the Western Balkan region”: ReSPA Working paper; “decentralized” competencies such as education and child http://documents.worldbank.org/curated/en/419571468050699276/ care in Macedonia. pdf/421550ER0P09621isclosed0Feb02802008.pdf 14. Nikolov M. 2016. Contribution with a Chapter in a Book: Multi "Lack of proper needs assessment at central and local level level finance and the Euro crisis: Causes and effects. ISBN978 for infrastructure projects in order to make pre-feasibility 1 78471 511 3; http://www.e-elgar.com/shop/eep/preview/book/ PPP assessment as of what project are affordable and what isbn/9781784715113/, Edward Elgar Publishing. projects provide good value for money so that it can be 15. ReSPA Working paper 2015. “PPP in the Western considered as PPP projects. For example, at the municipal Balkan region”; http://www.respaweb.eu/download/doc/ level the author is not aware of any proper strategic plans ReSPA+PPP+Working+Paper.pdf/303a4782ecd38f039d270ac39db of municipalities in direction of identification of what a69ee.pdf projects can be considered as PPP projects." 16. UNDP. 2005. Fiscal decentralization in transition economies: Case studies from the Balkans and the Caucasus. http://www.cea.org.mk/ References documents/studii/FiscalDecentralization2005%20UNDP.pdf 1. Bartlett W., Cipusheva H., Nikolov M. and Shukarov M. 2010. The 17. UNDP. 2009. People centered analysis. http://www.seeu.edu.mk/ quality of life and regional development in Macedonia. Croatian files/research/undp/PCA2009ENG.pdf Economic Survey Vol. 12 No. 1 April 2010: pp 121-162. https:// 18. World Bank. 2008. Public expenditure review. Report No. 42155-MK. core.ac.uk/download/pdf/6253957.pdf http://documents.worldbank.org/curated/en/419571468050699276/ 2. Becchis F. 2015. Water sector regulation in Macedonia. Under the pdf/421550ER0P09621isclosed0Feb02802008.pdf framework of a policy expertise contract with the Association of Public Communal Service Providers in the Republic of Macedonia (ADKOM) within the project “Capacity Development for Improved Performance of Water Utilities: Regulation, Efficiency and Quality”. 3. Center for Economic Analyses – CEA. 2006. The future of local public finances. http://www.cea.org.mk/documents/studii/CR_ ANG_WEB.pdf 4. Center for Economic Analyses – CEA. 2016. Benefits and Costs from Foreign Direct Investments in the Technological Industrial Development Zones Case: Macedonia in the period 2007-2014. http://cea.org.mk/wp-content/uploads/2016/04/1.-Benefits-and- costs-from-FDI-in-TIDZ-ENG.pdf 5. Government of the Republic of Macedonia. Public investment pro- gramme 2009-2011 6. Government of the Republic of Macedonia. Fiscal strategy 2011- 2013. http://www.finance.gov.mk/files/u6/Fiskalna_strategi- ja_2010-2013_konecno.pdf

An Overview of Public Utility Services and General Legal Framework for PPPs and Concessions in Montenegro

Budimka Golubović*

This contribution casts a light on the system of public utilities in Montenegro, assigned to local self-government units. As local public utility companies are facing poor financial and other capacities to provide quality services, long awaited Law on PPP is expected to provide additional mechanisms to the existing legal framework. The author argues that it is necessary to adopt and adjust legal, regulatory and political frameworks, create a stable political- economic environment, and harmonize laws with EU’s regulations and best practices.

Introduction cant investment from the public incomes in infrastructural projects. Additional characteristics of national and local According to the IMF’s World Economic Outlook budgets are previous and inherited/chronically high debt Database as of October 2016, Montenegro, population and high dependence on external financing: donations, 0.622 million, recorded a GDP of EUR 2.601 billion foreign investments, and loans from international finan- (2014). GDP for 2017 was projected to be EUR 2.922 cial institutions. billion. Public Utility Services Montenegro’s public sector consists of the Government of Montenegro, appointed in December 2016, with 19 According to the Law on Local Self-Governments and ministries, 19 bodies/agencies belonging to relevant mi- other relevant administrative regulations in Montenegro, nistries, 6 separated administrations, 2 secretariats, 7 ins- public utility services in Montenegro are assigned to lo- titutes, 1 directorate and 1 agency. Montenegrin territory cal self-governments. Each of the local self-governments is divided into 21 municipalities, Capital of Podgorica in Montenegro, according to the local regulations, has with 2 City Districts and The Old Royal Capital of an established local public utility company/companies Cetinje. Namely, there are 23 local self-governments in for providing public utility services: water supply, sewage Montenegro, while 2 of them are recently established and draining systems, solid waste removal and recycling, with poorly developed administration53. public lighting, parking services, etc. Additionally, local self-governments have established local departments to Local budgets are financed from: (i) own income – taxes deal with conducting and developing communal services, or fees determined by local parliaments, but limited by maintaining communal facilities and securing communal general legislation; (ii) legally shared revenues, inclu- order. They also engage in construction and reconstruc- ding Personal Income Tax, Concession Fees, etc.; (iii) tion works on local and uncategorized roads, streets and Equalization Fund and (iv) national budget. passages in settlements. They arrange for construction and use of facilities, outbuildings and temporary facili- The public sector should provide the highest possible ties, adequate development in accordance with local urban level of services for local populations. Therefore, it should planning and communal services. Therefore, local self-go- invest resources provided by populations and national vernments in Montenegro are mostly interested in making resources in infrastructural projects. Provision of sources public utility service more efficient and effective. is always a challenge for the public sector since regular budget incomes and resources’ utilization are limited by Companies that local self-governments had established their own capacities and economic-political decisions. in Montenegro were Public (Utility) Companies (PUCs) Challenges that national, especially local governments in prior to implementation of the Law on Improving Montenegro are facing are related to keeping the fiscal Business Environment, effective in 2010. The law brought self-sustainability and poor potential to provide signifi- local governing bodies into public competency. Therefore,

* Budimka Golubović has seventeen years’ experience as a project manager, researcher and analyst, and a valuable knowledge on Montenegrin business legislation, including EU and regional business and trade cooperation programs and institutions. She had been managing projects on procedures’ simplification and introduction of the one-stop-shop in local self-governments and is experienced in business strategic planning and economic-financial analysis. She is a licensed evaluator for the field of Economy-Finance. Ms. Golubović worked for a local NGO and for a USAID Contractor, to develop programs in the fields of economy and business. She has also led financial departments and managed many business research and consulting [email protected] 53 Petnjica in May 2013 and Gusinje in March 2014.

all local PUCs became companies – rarely shareholdings, government free management; transparency; non-discri- mostly Limited Liability Companies (LLCs) founded mination; equal treatment (prohibition of discrimination 100% by local government. The major positive effect of of any person); indivisibility of the project; proportionali- this transformation, forced by the law, is that those com- ty; free competition; efficiency; environmental principles; panies could be privatized, transformed, and managed legal security; free will. by professionals, either partly or temporarily. On paper those companies are a part of the free market! Although Current legislation for this issue in Montenegro is related all PUCs became LLCs within 3 years as prescribed by the to the Law on Private Sector Participation in Delivery of law, almost nothing changed in their business operations, Public Services and Law on Concessions. Some parts of the development, financing or management. Law on Private Sector Participation in Delivery of Public Services were put out of force after adopting the Law on Box 1: Concession. The Law on Private Sector Participation in Delivery of Public Services aims to increase the level of The Law on Local Self-Governments and the Law private sector participation in activities of common/public on Public Utility Services calls on local governments interest. It is applicable to all public bodies and refers to to organize public utility services. Local Parliaments delivery of public services relevant for the contract on lea- establish Public Utility Companies (PUCs) with sing and management, as well as agreements on BOT. The 100% ownership, management and control. Local Law on Concessions is substantially transposed into the Parliaments also determine and control prices and ser- Draft Law on PPP, while now it determines the conditions vice quality on a regular basis through annual reports and procedures of utilizing public resources by a private delivered by those Companies. Pricing methodology company for the common/public interest. and monitoring of the complete public utility sector is entrusted to the Government of Montenegro. There is Still, new Draft Law on PPP is criticized in various aspects: no case of sharing ownership, management or control it reduces the control role of the National Parliament in over PUC’s in Montenegro, although that option is comparison to the Law on Concessions, as the Government possible, having in mind that PUC’s are organized as of Montenegro is to decide and monitor concession LLCs. Examples of providing public utility services by contracts; it excludes the public debate on each concession some investors or another company are arranged as contract, which is mandatory; there is no time limitation separate projects or time-limited contracts. for the concession contracts as it is currently foreseen in the Law on Concession (60 years); it foresees the esta- The new Law on Public Utility Services, effective blishment of the Agency on Investments as the monito- February 2018, prescribes that the Energy Regulatory ring body, responsible to the Government of Montenegro, Agency will be in charge of licensing companies that which again excludes the National Parliament from deci- could provide public utility services, determines price ding on utilization of national resources. Additionally, the methodology, monitors quality of services provided, Law on Concessions defines several types of concession takes care of public interests and proposes regulations contracts although only public works and public services in the area of public utility services. concessions could be considered as PPP projects.

PPP legal framework in Montenegro According to the Law on Concessions, local governments are attributed a certain share of a concession fee Local public utility companies are facing poor financial if the concession subject is located on its territory. That and other capacities to provide quality services and local share is regulated by the Law on Financing Local Self- governments have recognized PPP as an adequate and Governments in the following way: 70% of the concession efficient model for accommodating all interests. However, fee for natural resources, 20% for the port and 20% for Montenegrin legislation does not recognize PPP and the the coast use. Although municipalities participate in the Draft Law on PPP dates February 2015. Considering the concession contracting procedures, the government is ma- EU Directives and best practice in this area, this is highly king decisions on the choice of concessionaires and deter- recommended, but still in the “public debate phase”. The mines other contract elements. The budgets and transfer Draft Law aims to determine conditions, ways and pro- of concession fees transfer between national and local level cedures for adopting PPP projects, rights and obligations is not quite transparent. of both public and private partners, content and procedure of PPP contracts, PPP forms, best bidder selection Despite this and the fact that municipalities and Union procedure and other relevant issues. The draft is based on of Municipalities54 as their supporting institution analysed the following principles: public interest protection; public and recognized the PPP model as efficient and adequate

54 A round table discussion on “The legal framework for public-private partnerships in Montenegro” was organized on March 13th 2015 in Podgorica by the Cabinet of Deputy Prime Minister for Economic Policy and Financial System, in cooperation with the Union of Municipalities within the public discussion on Draft Law on PPP. The Round Table’s aim was to familiarize stakeholders with the new legislation proposal, with a particular focus on local government units in terms of public contracting authorities and business associations from the aspect of private partners. NetworkNetwork Industries Industries newsletter Quarterly | |vol. vol. 13 19 | | n°3no 1 | |2014 2017 1818 dossier

for providing quality services at low costs, they do not and 15-year contract for the financing, construction have plans for utilization of facilities and locations for PPP and operation of a medical waste facility, signed in implementation, they still have not developed adequate 2011. analysis and expertise in this area, nor the expert support at the national level. • Several projects in the tourism sector through concession and/or leasing attractive coastal zones for its valo- Although best practice examples are available, including risation were planned in 2010 and some of them are the South East Europe PPP Network which does not currently in the implementation phase (Lustica Bay), include Montenegro, Montenegrin authorities have not others are in the tendering phase (Ada Bojana, Velika scrutinized best practices despite obvious need, especially plaza) that the Ministry of Sustainable Development at the local level. and Tourism is working to coordinate the projects.

PPP practice in Montenegro Local level:

Available data on completed or implementing PPP pro- • The Capital of Podgorica recently (end of 2016) jects in Montenegro could not be fully given as exact and announced signing the PPP contract with a local final since there are no systematic data neither at the natio- construction company on reconstruction of the city nal nor local level. The Concession Commission is keeping stadium. The agreement is to share business premises records on the concession contracts, which include PPP at the stadium after the reconstruction 66.4%: 34.5% projects, but without clear difference between PPPs by its in favour of private partner. definition and other types of concessions. National and local governments implemented several PPP projects: • The Capital of Podgorica implemented two urban development projects (commercial centres and market National level: halls) and a social housing project.

• In the IT sector, the Government of Montenegro • The local government of Cetinje implemented a small acquired the “Wireless Montenegro Project” in 2011. street lighting project under a 25-year contract for the This project includes the supply and operation of a commercial and touristic development of the “Lipska digital radio communication system for the national Cave” speleological site. emergency services and a Wi-Fi broadband internet network for commercial use. It was developed as an • The local government of Herceg Novi implemented a institutionalized (joint venture) PPP in which the local road project under a 22-year concession. government has a 25% stake and the Austrian private partner has the remaining 75%. The system has par- • The local government of Budva is implementing tially been implemented whilst the Wi-Fi broadband several touristic PPP projects: resorts, golf courses, internet network still has to be deployed. hotels. Some of them are postponed, while some are in progress. • The Ministry of the Economy procured 13 concessions for the construction and operation of small hy- Conclusion dro-power plants under two bundled tender processes conducted in 2008 and 2010. Four of these were ter- PPP concept has not been introduced and implemented in minated early due to the non-fulfilment of contrac- Montenegro as it should have been. Therefore, it is neces- tual obligations by the private partners, while others sary to adopt and adjust legal, regulatory and political fra- are under some of the implementation phases. meworks, create a stable political-economic environment, harmonize laws with EU’s regulations and best practices. • The Ministry of Education implemented a students’ Local business communities and policy stakeholders are dormitory project in Podgorica in 2012. In this pro- unfamiliar with the PPP concept. They should have easy ject, the private partner is responsible for the design, access to the information. It is important to present the financing, construction and operation of a student concept to those who decide and those who might benefit accommodation facility, which will be transferred to from. the Ministry once the 30-year contract has expired. Montenegrin institutions at the national and local level • The Ministry of Health procured two concessions: are still not part of regional and other networks in this 25-year contract for the financing, construction and area. Some institution should be established for making operation of a PET/CT equipment, signed in 2010 this concept available and familiar to relevant bodies.

Even those PPP/Concession projects implemented or planned in Montenegro are not targeting the sectors they are intended for – public utility services. There is no adequate plan or structure for potential PPP projects that include the investment need assessment, spatial and other plans for particular location, cost-benefit analysis for the potential projects, organizational proposal and other key elements for initiating PPP project. Loans are still the main source of financing infrastructural projects, which makes Montenegro even more financially instable.

One of the strongest advantages of the PPP concept is its transparency and it’s unclear as to whether this is a cause or consequence of the situation for its lack of implementation in Montenegro despite the necessity for such measures.

References 1. Official Gazette of Montenegro No. 88/09. 2009. Law on Local Self-Government in Montenegro, 2. Official Gazette of Montenegro No. 5/2008, 1/2008, 74/2010 and 1/2015. 2015. Law on Financing Local Self-Government in Montenegro. 3. Official Gazette of Montenegro No. 08/09. 2009. Law on Concessions in Montenegro. 4. Official Gazette of Montenegro No. 40/10. 2010. Law on Improving Business Environment. 5. Official Gazette of Montenegro No. 055/16. August 2016. Law on Public Utility Services. 6. Government of Montenegro. Strategy on the Public Administration Reform 2016-2020. July 2016. 7. Government of Montenegro. Draft Law on Public Private Partnership. February 2015. 8. Government of Montenegro. Privatization Plan 2014. January 2014. 9. Institute Alternative. Public-Private Partnerships in Montenegro – Accountability, transparency and efficiency. 2012. 10. European PPP Expertise Centre. PPP Units and Related Institutional Framework. March 2014. 11. Centre for Civic Education and Institute Alternative. Local Self- Government and Public Private Partnership. 2014. 12. Regional School of Public Administration (ReSPA). November 2015. Comparative Analysis of Lessons Learned from Recent Development in Implementation of Public Private Partnership Projects in the Western Balkans Region.

General Framework for Liberalization and Regulation of Public Utilities – the Case of the Republic of Slovenia

Aleš Ferčić*

Legal framework for liberalization and regulation of public utilities in the Republic of Slovenia is in principle comparable to similar legal frameworks in other European Union Member States. In the field of public-private partnerships (PPPs), Slovenian legal framework is well developed, however, institutional support at the state level needs to be improved and more pro-active approach of the Government would be highly welcome.

1. Introduction Before I proceed to discuss public utilities in the Republic of Slovenia, I would explain some related concepts, na- The Republic of Slovenia55 became an independent mely, public sector, public undertakings and public ser- country on 25 June 1991. Simultaneously, it began to vices. Public sector of the Republic of Slovenia is consisted transform its political and economic systems and sub-sys- of: public organs or administration at the state and local tems. Not surprisingly, the Slovenian public sector also level, public funds, public institutes, (independent) agen- underwent this process. cies established by the state or/and by one or more municipalities, Health Insurance Institute of Slovenia (manda- The initial impetus for public sector transformation can tory service), Pension and Disability Insurance Institute of be mostly attributed to internal factors. A new constitu- Slovenia (mandatory service), public economic institutes, tional order brought many substantial organizational and and public undertakings and other legal persons under procedural changes, which directly or indirectly affected the state or/and municipalities control. Public underta- the Slovenian public sector and triggered its transfor- king has two meanings in the Slovenian legislation. The mation56. Further impetus came from outside due to Services of General Economic Interest Act defines public increased participation in the international community. undertaking by using narrow formalistic approach, since The most important factor however was the country’s it is defined as a company established and governed by orientation towards the then European Community the state or/and one or more municipalities for the pro- (EC)57. Its influence has been present even before the vision of services of general economic interest. On the Republic of Slovenia became a Member State in 2004 other hand, the Transparency of Financial Relations and and a member of the Euro-zone in 2007. Obligations Maintenance of Separate Accounts for Different Activities accepted during the association process and even more so Act defines it by using wide functional approach (as used after accession play(ed) a significant role in shaping the in the Directive 2006/111/ES). Public services in the Slovenian public sector or at least of its ‘economic part’58, Republic of Slovenian are non-economic or economic which traditionally includes public utilities. activities subject to public services obligations. Here, the

* Dr. Aleš Ferčič is an associate professor at the Faculty of Law of the University of Maribor and Head of the Institute for Public Law at the University of Maribor. He holds the following courses: Constitutional and Administrative Law and European Union Legal System: Selected Topics; Administrative Law; and European Economic Law. His specialty is Public Economic Law. [email protected]

55 The Republic of Slovenia is a parliamentary republic. Its public administration is organized at the state and local level. The local public administration is composed of 212 municipalities whose typical competences are local spatial planning and development, and provision of local public services including water and wastewater service). Some state’s macroeconomic data: GDP(2015): 18,693 EUR per capita; volume growth of GDP (2015): 2.2 %; GDP per capita in PPS[EU-28 = 100](2015): 83; actual individual consumption per capita in PPS[EU-28 = 100](2015): 75; public debt (2015): 83.1 % of GDP; share of domestic production in total supply of goods and services (2013): 69.7 % (total value of domestic production: goods 33.2 %, services 66.8 %); average price change for total use(2013): 96.4 %; average price change for final household consumption(2013): 100.4 % (see: the Slovenian Statistical Office web-page).

56 Without any ambition to discuss new constitutional order and the aforementioned significant changes in this article, let me just point out a shift from the administrative economy to the social market economy. 57 And after the Lisbon Treaty from its ‘successor’, i.e. the European Union. 58 Because of the principle of institutional autonomy this influence was more or less indirect.

main emphasis is on the economic public services, which conditions for the establishing of desired market compe- correspond to services of general economic interest in the tition intended to be created. By this kind of ex-ante eco- sense of article 106(2) of the Treaty on Functioning of the nomic regulation precisely the problem of infrastructure European Union. should be solved, which is characterised by a combination of a natural monopoly and economic irreversibility of Liberalization in the network infrastructure sectors (fixed) costs. This was done in such a way that the obligation of the incumbent, which owned the infrastruc- Liberalization in network infrastructure sectors, such as ture, was defined such that it had to provide interested energy, communications, postal services and transport sec- companies with access to it, and at an appropriate price. tors, has been unrolled according to the European Union Moreover, this price was/is not set by the incumbent, but (EU) legal framework59 consisting of sector specific rules by the so-called national sector regulator63, which was esta- (and of general competition rules)60. Yet this in spite of blished as an independent regulatory agency specifically in the sector specific approach, used because of considerable order to define price and to perform other ex ante regula- differences between the aforementioned sectors61, one can tion in certain64 economic sectors under the liberalization perceive more or less the same pattern of liberalization process. Since the simultaneous presence of the former process in those sectors. vertically-integrated monopolist on the markets, both above and below the network infrastructure operation First, legal barriers for market-entry, (mainly) created by market proved to be problematic in a daily practice65, this exclusive and special rights, were removed62. But this eventually led to its disintegration or by using different alone would not suffice for the transformation of pre- kinds of separation66 of the network operation from other viously closed and uncompetitive markets to (more) com- business activities. petitive markets, since companies that would like to enter this market, i.e. new-comers, would not be able to effec- As a result, in the aforementioned sectors competition gra- tively offer services because of the lack of (own) network dually sprang up but not of the same kind and not of the infrastructure, having a characteristics of essential facility, same intensity. Namely, in the central or pure public uti- which was in hands of ex-monopolists, i.e. incumbents. lities markets, i.e. network infrastructure operation mar- Therefore, the second logical step was a pro-competitive kets, one can mainly find competition for the market67, regulation, through which actual and not merely formal while in the upstream and downstream markets dominates

59 Considering the nature of this article, I do not discuss the European Union legal framework in detail here; however, for practical reasons I would like to point out the following: - the European Union law has a constitutional character within the Slovenian legal system; - the European Union has an exclusive competence in the establishing of the competition rules necessary for the functioning of the internal market; - the so-called sector specific rules define far-reaching obligations for Member States, however, this is not to say, that all-sectors general competition or economic rules do not play any role but rather opposite; - the European Commission shall ensure, inter alia, the application of competition rules and shall, where appropriate, address appropriate directives or decisions to Member States. 60 Considering the European Commission’s practice in last ten years, it is obvious that the general competition rules, such as articles 101, 102 and 107 TFEU, are often used for the purpose of (full) liberalization. 61 One size simply does not fit all. 62 Such a ‘de-monopolization’ is a pro-competitive deregulation. Since a deregulation can be oriented towards more or less competition; I use the adjective 'pro-competition'. 63 In the Republic of Slovenia there are more than just one sector regulator. 64 Such as energy sector (around 3 % of GDP2015), communications sector (around 4 % of GDP2015), postal services sector (around 0.5 % of GDP2011) and transport sector. 65 Because of the real chance of the abuse of power, which stems from ownership and management of the network infrastructure, on the upstream or downstream markets. 66 There are several kinds of separation having different nature or intensity. The first grade of separation is accounting separation, which demands separate accounting for each activity. The second grade of separation is functional separation, which demands separate business units or departments (within the same legal person) for each activity. The third grade of separation is legal separation, which demands separate legal persons for each activity. Finally, the fourth grade of separation is ownership separation, which demands separate ownership for each activity, that is to say, there cannot be a business group carrying out the operation of network infrastructure (essential facility) and which would at the same time carrying out one or more activities at the upstream or downstream market(s). 67 Where the network infrastructure is predominantly operated by public undertakings, e.g.: - ELES, d.o.o., electricity transmission system operator, - SODO, d.o.o., electricity distribution system operator, - Plinovodi, d.o.o., natural gas transmission system operator, - Pošta Slovenije, d.o.o., universal postal services operator, -Telekom Slovenije, d.d., communications system operator, - Slovenske železnice – Infrastruktura, d.o.o., rail system operator. NetworkNetwork Industries Industries newsletter Quarterly | |vol. vol. 13 19 | | n°3no 1 | 2014| 2017 2222 dossier

competition within the market68. ted public bodies, predominantly by local and regional public undertakings74. Even though I do not want to make However, that is certainly not to say, the competition any prejudice, since at the moment there is still no act for sprang up in the aforementioned sectors only. After all, implementation of the new article 70a of the Constitution in the new paradigm of social market economy as intro- and, logically, no case law in this regard, it is relatively safe duced at the beginning of the nineties a private property to say that at least in the mid- and long-term period75 the protection, free business incentive and market competi- new constitutional provision has a potential to affect the tion became a general rule69. Yet, also this rule is not wit- water sector structure and competition76. As far as I un- hout exceptions or limits, mainly due to the public interest derstand the new constitutional provision, it excludes pri- considerations70. In the social market economy, economic vate participation in two ways; it demands public owner- aims shall not a priori prevail over non-economic aims71. ship over water resources as well as public provision of water supply services. With other words, the Constitution This approach is important to take into consideration in itself now prohibits two kinds of the genuine or material all economic sectors, particularly in those providing essen- privatization, i.e. privatization of public asset (water re- tial services. I would also like to point out the water sec- sources) and of public task (provision of water supply ser- tor, not only because it is a typical network infrastructure vice)77. Yet, this seems to be in line with the EU law since sector but also because of the new constitutional provi- it is neutral in relation to national decisions governing the sion which explicitly recognized the self-standing right to ownership regime for water undertakings78, and also – at drinking water and it reserved provision of the household least de iure79 – in relation to the self-provision of public water supply for public sector72. tasks in the water sector80. On the other hand, however, I have scruples about the (supposed)81 intent to transform The Slovenian water sector was not liberalized according the household water supply from economic to non-eco- to the aforementioned liberalization pattern, yet some nomic activity82. market competition, although modest, sprang up, but private participation is relatively weak73. In principle, the Let me here also point out that the new constitutional pro- Slovenian water sector is dominated by vertically integra- vision is directed at water resources and household water

68 A market competition is not protected by the European Union rules only, but also by the genuine domestic rules, including competition rules, whose scope of application is not limited to cases where the trade between Member States may be affected.

69 At the moment, I am not aware of any specific liberalization agenda, since the competition approach is already dominant. But at the same time, I would like to point out that there is a privatization agenda according to which more or less all public utilities companies directly or indirectly owned by the Republic of Slovenia are classified as strategic investment which should in principle stay in the state’s hands (see http://www.sdh.si/en-us). For practical reasons, let me point out the article 345 TFEU according to which the Treaties shall in no way prejudice the rules in Member States governing the system of property ownership. 70 In principle, supranational (and national) competition rules define relative prohibition of restrictions of competition. See for example articles 101(3), 106(2) and 107(2-3) TFEU.

71 In case of their collision, a careful primacy-assessment must be carried out on case-by-case basis. 72 Article 70a of the Constitution: (1) Everyone has the right to drinking water. (2) Water resources shall be a public good managed by the state. (3) As a priority and in a sustainable manner, water resources shall be used to supply the population with drinking water and water for household use and in this respect shall not be a market commodity. (4)The supply of the population with drinking water and water for household use shall be ensured by the state directly through self-governing local communities and on a not-for-profit basis. 73 Here, I limit myself to household water supply services and to waste water or sewage services. 74 In 2014, the structure of the Slovenian Water Sector was as follows: self-provision: 26%; local public undertakings: 26 %; regional public undertakings: 58%; (private) concessions: 4%.

75 I expect that the existing concessions granted to private undertakings will remain in force. 76 At any rate in the field of household water supply services while this is less likely in case of waste water or sewage services. 77 Privatization in a wide sense is a transfer of something, e.g. of a task, right or asset, from a public to private sphere. In theory, there are different classifications of privatization, however, in this article I use very common classification, i.e., the so-called formal privatization in case a legal person of public law is converted into legal person of private law, and the so-called genuine or material privatization in case a specific (public) task is transferred to private person where the transferred task remains under the public control, e.g. public services concession, or where this is not the case; or in case a specific (public) asset is transferred to private person (e.g. sale of shares). 78 See article 345 TFEU. 79 In addition, one should also consider possibility of de facto impact of state aid and other general competition rules. 80 See Communication from the Commission on the European Citizens’ Initiative ‘Water and sanitation are human right! Water is a public good, not a commodity!’, COM(2014) 177 final, 19. 3. 2014.

81 This assumption relies on the informal discussion with a member of a working group which has prepared the theoretical background for the new constitutional provision.

82 The application of the competition rules does not depend on whether the entity is set up to generate profits. Non-profit entities can also offer goods and services on a market. See Commission Notice on the notion of State aid as referred to in Article 107(1) of the Treaty on the Functioning of the European Union, OJ C 262, 19. 7. 2016, p. 1.

supply ‘only’, therefore it at least formally (de iure) allows of operating PPPs, the special features of works and ser- private participation and market competition in other seg- vice concessions and of public-private equity partnerships, ments of the water sector, e.g. the disposal of sewage or the transformation of public companies, the system of waste water. In the daily practice, however, although the law that applies to resolving disputes arising from PPPs core activities such as water supply and wastewater treat- and the jurisdiction of the courts and arbitration services ment are legally considered as two different activities, in to decide on disputes arising from such relationships88. most cases the same undertaking provides both activities Unfortunately, considering the length of this article, only in a given geographical area. certain issues can be discussed here.

Public-Private Partnerships (PPPs) in Network The purpose of the Act is twofold. It intends to foster and Infrastructure Sectors protect the public interest and it intends to enable and promote private investment in the construction, main- PPPs can be found in all aforementioned network infras- tenance and/or operation of structures and facilities of tructure sectors, yet, until now, projects above 1million PPP and other projects that are in the public interest, to EUR are mainly concentrated in the field of energy83 and ensure the economically sound and efficient performance water84, which are mainly concentrated at the sub-national of commercial and other public services or other activities, level (i.e. regional or local/municipality level). I assume which are provided in a method and under conditions that that in these two fields even new public private partner- apply to commercial public services. It also relates to other ships will be established in the near future considering the activities whose performance is in the public interest, aims trend towards smart grids in the field of energy and also to facilitate the rational use, operation or exploitation of considering the need to modernize as well as to expand the natural assets, constructed public good or other things in canalization and sewage or sanitation plants85. Moreover, public ownership, and other investment of private or pri- I assume at least some new PPPs in Slovenia will be es- vate and public funds in the construction of structures and tablished in the field of (tele)communications; namely, facilities that are partly or entirely in the public interest, or because of thoughtless spatial planning which led to very in an activity provided in the public interest89. dispersed settling with low user-density, there are a lots of (rural) areas where private investors alone will certainly The Act defines methods of promoting PPPs. In order to not be willing to invest in the so-called high- and ultra- promote PPP, the public partner must, inter alia, assess speed broadband networks. Moreover, at the moment it is whether it can be carried out as a PPP; namely, it shall also not certain how the so-called second rail track will be assess the grounds of project feasibility and comparison built, while PPP is one of several options. of options or other projects. This assessment is obligatory, except in the case of projects provided by a regulation. In The Republic of Slovenia enacted its Public-Private my opinion, in this regard some improvements are still Partnership Act as late as 200686. The act regulates the possible. There are cases where in reality no business risk purpose and principles of private investment in public was transferred to private persons who even do not make projects and/or of public co-financing of private projects any investments and yet exclusive or special rights were that are in the public interest (hereinafter: PPP)87, the granted90. Again, at the state level more should be done methods of encouraging PPP and the institutions concer- not in terms of support only, even in form of consulta- ned with its encouragement and development, the conditions, but also in terms of control. Another tool to pro- tions, procedure for creation and the forms and methods mote ‘healthy’ projects is that decisions determining the

83 More precisely, natural gas distribution network. 84 More precisely, water distribution network, canalization and sewage or sanitation plants. 85 Here is already considered a potential impact of the new constitutional provision, which would probably decrease public private partnerships regarding the water distribution network. The latter will, however, need great investments considering the fact that one-fourth of the Slovenian water network was installed before the year 1920. See Water and Wastewater Services in the Danube Region: Slovenia Country Note, IMF, 2015, p. 6.

86 As it seems the act will be modified in the near future by the Act on the award of concession contracts and public-private partnerships which intends to implement the Directive 2014/23/EU of the European parliament and of the Council of 26 February 2014 on the award of concession contracts, OJ L 94, 28. 3. 2014, p. 1. In addition to the aforementioned ‘central’ act in the field of public private partnerships, also some other horizontal and sector specific acts apply.

87 More precisely, according to the article 2 of the Public-Private Partnership Act, public-private partnership is a relationship involving private investment in public projects and/or public co-financing of private projects that are in the public interest, and such relationship is formed between public and private partners in connection with the construction, maintenance and operation of public infrastructure or other projects that are in the public interest, and in connection with the associated provision of commercial and other public services or activities provided in a way and under the conditions applicable to commercial public services, or of other activities where their provision is in the public interest, or other investment of private or private and public funds in the construction of structures and facilities that are in part or entirely in the public interest, or in activities where their provision is in the public interest. 88 See article 1 of the Public-Private Partnership Act. 89 See articles 6 and 7 of the Public-Private Partnership Act. 90 See Poročilo o sklenjenih oblikah javno-zasebnega partnerstva v Republiki Sloveniji (2009).

public interest in establishing PPP and on implementing Conclusion projects in one of the forms of PPP shall be taken by the Government or by the representative body of a self-go- Legal framework for liberalization and regulation of public verning local community. Other public partners may take utilities in the Republic of Slovenia (particularly in the decisions determining the public interest in establishing economic sectors such as energy, communications, postal PPP and on implementing projects in one of the forms services and transport) is in principle comparable to this of PPP only on the basis of the agreement of the founder kind of legal frameworks in other EU Member States. or of authorization provided by law. PPP contracts shall be adopted by other public partners after obtaining the Namely, in the new paradigm of social market economy consent of the founder91. Yet, also in this regard I some- as introduced at the beginning of the nineties a private time miss more awareness that PPP is not a miracle so- property protection, free business incentive and market lution which always works, no matter how it is planned competition became a general rule. Yet, this is not to say and executed. The truth is, PPP is neutral since it could there are no exceptions, which are probably most obvious be either success or failure, depending on its performance in the water sector. Nevertheless, a private participation from the first to last day of the project. Although for now and market competition are in principle more or less pres- I am not aware of any project in the Republic of Slovenia ent in all network infrastructure sectors, but of course not that would fail, I would like explicitly to point out that we of the same intensity and not of the same kind. As I alrea- shall not assess the sphere of private and public92 partners dy said, in the central or pure public utilities markets, i.e. only, but also the sphere of customers/users. network infrastructure operation markets, one can mainly find competition for the market, while in the upstream The Act empowers the Ministry of finances to form a spe- and downstream markets dominates competition within cial organizational unit within its structure to develop, mo- the market95. nitor and cooperate in implementing PPPs in Slovenia, to draw up manuals for operating PPPs, to formulate expert In the field of PPPs one can notice relatively well deve- proposals for amendments to regulations and the adoption loped legal framework, however, institutional support at of other measures that might help improve practices and the level of state needs to be improved and more pro-active eliminate problems in this area, and to perform other tasks approach of the Government would be highly welcome. provided by this Act. In addition, for the purpose of stu- In fact, the biggest weakness lies in the institutional design dying policy and providing consultation in the area of PPP and capacity to plan nation-wide projects. This is in parti- a Council of the Slovenian Government for PPP shall be cular obvious when state projects are compared with local created, which shall be headed by the minister competent projects. Namely, local projects have been relatively large for finance, while other members of the Council shall be in investment terms, and it is fair to say that numerous independent experts in the economic, legal and other areas local authorities have shown capacity to plan and execute of PPP93. Yet, in my opinion, this institutional support large-scale projects which is certainly encouraging. needs to be reconsidered and reformed in order to become more proactive. What is more, I believe that the major References shortcoming in the discussed field is weak national-level or 1. European Commission, Communication from the Commission on central support and capacity to plan nation-wide projects. the European Citizens’ Initiative ‘Water and sanitation are human Nevertheless, as the practice shows, PPPs at the local level right! Water is a public good, not a commodity!’, COM(2014) 177 are in principle very successful in terms of planning and final, 19. 3. 2014. executing projects, even when relatively large-scale. 2. European Commission, Commission Notice on the notion of State aid as referred to in Article 107(1) of the Treaty on the Functioning Last but certainly not least, the Slovenian Public-Private of the European Union, OJ C 262, 19. 7. 2016, p. 1. Partnership Act recognizes two forms of PPP94. Namely, 3. International Monetary Fund, Water and Wastewater Services in the the contractual and institutional (equity) PPPs. In the Danube Region: Slovenia Country Note, IMF, 2015. network infrastructure sectors the latter can be found 4. Directive 2014/23/EU of the European parliament and of the very rarely. That is to say, a great majority of all PPPs in Council of 26 February 2014 on the award of concession contracts, the Republic of Slovenia are established in the form of OJ L 94, 28. 3. 2014. contractual arrangement.

91 See articles 8 – 11 of the Public Procurement Act. 92 In a strict sense (public authority or body as such). 93 See articles 20 – 22 of the Public-Private Partnership Act. 94 See articles 26 – 30 and articles 96 – 134 of the Public-Private Partnership Act. 95 Again, the water sector has rather different characteristics.

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Liberalization Agenda and the General Framework of Serbian Local Public Utility Services Regulatory Regime

Tatjana Jovanić*

This contribution aims to cast a light on the existing local utilities regulatory framework in Serbia, and its performance and financing, including public- private partnerships and concessions. As liberalization agenda is on the horizon, the author argues that institutional capacities of local administration have to be strengthened and regulatory powers of cities and municipalities well understood and elaborated.

Introduction and deregulation were the main pillars of the reforms, blindly followed by politicians who have made many Since democratic changes in 2000, after a long and still wrong decisions in setting transition goals. After more ongoing process of transition to a market economy, the than two decades of transition, a political interest still Serbian government strives to pursue fiscal, structural dominates in assets, and the inefficiencies of the public and regulatory reforms under an IMF program that runs sector of the economy have accumulated a large structural through 2018. GDP Annual Growth Rate in Serbia ave- deficit, passed through to public debt. Drafted on the basis raged 2.81 percent from 1997 until 2016. of the Guideline on National Reform Programs issued by the European Commission, Serbia’s Economic Reform The Serbian road to the European Union (EU) started Program of 2016 focuses on steps ensuring the completion in November 2000, when a ”Framework Agreement of the privatization and restructuring of public companies between the EU and the Federal Republic of Yugoslavia and reduction of the state’s share in the economy. (FRY)” was signed, enabling the EU to provide assistance for political and economic reforms. The Stabilization and Even though tremendous progress has been achieved in Association Agreement between the EU and Serbia was liberalization, privatization, and macroeconomic stabiliza- signed on April 200896. On 22 December 2009, Serbia tion, the Serbian economy still faces problems generated applied for EU membership and received candidate status by the public sector, including country wide network in- for EU membership in March 2012. The Council of the dustries or local utilities. Although assets for performance European Union decided on 28 June 2013 to open acces- of local services of general economic interest were mostly sion negotiations with Serbia97. As a candidate country, left in the ownership of local authorities, the modalities Serbia has to align its system of macro-economic gover- of private infrastructure financing may be expected in the nance with the requirements set out by the EU. Namely, future, and hence all the inherited risks. the Enlargement Strategy of the European Commission suggested for the first time to create European Semester On the way to liberalization and restructuring local Light, fostering the system of national economic plan- utilities providers ning in order to assist western Balkan states with tackling economic reforms, restructuring their economies and sti- Restructuring of public enterprises and communal services mulating growth and employment from the early stages providers (as a special legal form for provision of services of accession negotiations. of general economic interest) is one of the most important reforms on the agenda, and a big challenge for state and For more than a decade in Serbia, the reforms were local administrations. Restructuring of public enterprises guided by neo-liberal doctrine and fostered by conditio- and liberalization in the network infrastructure sector to nality imposed primarily through international financial comply with the EU rules on competition is, on the other institutions such as the IMF. Privatization, liberalization hand, an explicit duty assumed by signing the Stabilization

* Tatjana Jovanić is an Associate Professor of Public Economic Law at the University of Belgrade, Faculty of Law, where she obtained an LL.B, Master’s degree, and a PhD. She also holds an LLM/Finance from the Johann Wolfgang Goethe University in Frankfurt am Main. She was a Visiting Scholar at the University of Pennsylvania Law School, and has spent shorter or longer periods at several European universities and institutes as a visiting researcher and/or guest lecturer. She is a member of several international professional associations, a member of the Steering Committee of the ECPR Standing Group on Regulation & Governance, and the Scientific Committee of Turin’s School of Local [email protected] 96 The Agreement entered into force on 1 September 2013. 97 The First Intergovernmental Conference took place on 21 January 2014.

and Association Agreement. and renegotiations. One of the critical components of the regulatory process is the price-setting mechanism, if prices From a strategic standpoint, the reform of public utilities are approved by a central level entity or the municipality in Serbia has been an issue on the agenda since the early who “owns” public utility. 2000s. One of the most comprehensive strategic documents has been created within an EU funded project – Organizational forms, control and ownership Municipal Infrastructure Support Program, the beneficiary of which was the Ministry of Regional Development and The Law on Public Enterprises and Activities of General Local Self-Government in 2010. Within this project, seve- Economic Interest99 defines activities of general economic ral toolkits were created dealing with project preparation, interest, which include public utilitie100s. Article 3 of this implementation, feasibility study etc. A (draft) Strategy law defines a public undertaking in a formalistic approach, of Restructuring of Public Utility Services has also been as a specific type of a legal entity, a company established by one of the outputs of this project98. However, up to now the state, autonomous province or a local self-government no systemic steps were taken to operationalize the idea unit. In addition, services of general economic interest of restructuring public utilities. The Fiscal Strategy fore- could be provided by a limited liability or a joint stock saw the enactment of the Program of restructuring local company exclusively owned by the State, company owned public utilities, and drafting of the National Strategy for by the Republic of Serbia, autonomous province, local Restructuring Local Public Utilities. However, no official self-government unit or a subsidiary of such companies, document has yet been published. Recently amended Law as well as the company or an entrepreneur to whom the on Communal Activities has paved a way for the entry of public body has conferred the provision of services. This private capital, but without any strategic approach there is definition is not in line with the Commission Directive a risk that the practice may diverge in more than 150 local 2006/111/EC of 16 November 2006 on the transparency self-government (local territorial government) units. of financial relations between Member States and public undertakings as well as on financial transparency within The legal framework certain undertakings101. Also, it contradicts the definition prescribed in the Law on Public Private Partnership and The main components of an enabling legal framework Concession, which is in line with the above directive. The Law on Public Enterprises and Activities of General As a pre-condition for liberalization of communal services, Economic Interest regulates the setting up and the busi- the most important legal framework set out by general ness of public enterprises. It entails general conditions for legislation should refer to the issues of ownership rights, performance of activities/delivery of services, or corporate organizational forms of service delivery, the public pro- governance. curement framework and tendering procedures, service financing mechanisms, price-setting mechanisms, the The law on Public Utility Activities102 listed fifteen com- budgetary framework of funding capital investments, and munal services, among which the majority represent ser- ensuring quality control and consumer protection. Péteri vices of general economic interest (e.g. water provision, classified the most important preconditions for local uti- district heating, parking service) which specific regulatory lity service delivery into seven categories (Péteri 2003: regime is more precisely defined in the Law on Consumer 11–22). First among them is legislation on organizational Protection103, however only in terms of consumer rights forms of service delivery, which ranges from rules on mu- such as the right to access, protection against disconnec- nicipal enterprises to general company laws. Depending tion, redress etc. An option is left to cities and municipa- on the scope of decentralization, local governments are lities to define, in their decisions on public utilities (based responsible for strategic development of public utility on this law) other potential communal services, as well as services as well as for various capital investment schemes details on the performance of services. Only the activities for local projects. In addition to the legal framework on of water distribution and the city transport by trolleybus tendering and public procurement procedures (PPP), PPP and tramway may not be provided by a private party, but rules refer to privatization and restructuring by creating solely a public enterprise owned by the local self-govern- the framework for alternative service provision, which ment unit. should enable better resource allocation and better performance, i.e., key components in service delivery, the selec- Competences and regulatory powers of Local Self- tion process of private partners, specifications of perfor- Government Units mance, agreements on price setting, service monitoring,

98 http://www.misp-serbia.rs/wp-content/uploads/2010/05/Strategija-restrukturiranja-JKP-Predlog.pdfkoristi 99 Official Gazette, No. 15/2016. 100 This corresponds to services of general economic interest in the sense of article 106(2) of the Treaty on Functioning of the European Union. 101 OJ L 318, 17.11.2006, p. 17–25. 102 Official Gazette, Nos. 88/2011, 104/2016. 103 Articles 83-92, Official Gazette, Nos. 62/2014, 6/2016.

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The Act on Territorial Organization of the Republic of rights and responsibilities of utility service users, the extent Serbia104 regulates its territorial organization, formed of and quality of communal services, and the conduct of su- the following units: autonomous provinces (Vojvodina pervision of the performance of services. The Government and Kosovo), 24 cities and 150 municipalities. There are determines the main features such as the minimal geo- 29 administrative districts, but an administrative district graphical cover or number of citizens to which a services does not represent a territorial organization unit, but ra- is provided, a frequency of delivery, quality parameters, ther a regional center of state authority. Law on Local-Self technical capacity which providers should fulfill etc. This Government regulates105, among other issues, competences Law further specifies the legislative power of the local self- and authorities of the City of Belgrade, and cities and government unit to determine the manner of performance municipalities as local self-government units. According of services, general and special rights of service providers, to this Law, the city or municipality may establish public including price controls and supervisory powers. This Law enterprises, or the public service could be contracted out, (Articles 25–29) sets the principles for price setting, basic in line with the principle of competition, transparency parameters of price methodology, the procedure of the and the application of the Law on Public Procurement. change in prices of communal services and supervisory Namely, the Assembly of the city or municipality decides power of the city/municipality in this regard107, as well as on setting up the services and public enterprises, executive the subsidized price for certain categories of users. and oversight boards, and gives consent on the statutes of such entities. In line with article 20 of this Law, the unit Contracting-out the supply of utility services and of a local self-government ensures the provision and deve- procurement lopment of communal services, and the organizational, material and other conditions for the performance of such At the local level, infrastructure investments by private services. investors were initially executed on the basis of the Law on Utility Activities of 1997, which enabled conferral of One of the consequences of the outdated definition of performing of communal services to an entity not owned/ a public enterprise is that different rules apply to public operated by the city/municipality. Most investments were companies, companies in majority state ownership and made in the sector of hygiene and waste management, private companies performing activities of general interest. areas which do not assume a large infrastructure invest- The Law on Activities of General Interest has not prescri- ment. Even before the first legal act regulating public-pri- bed the details of the procedure for conferral of the activi- vate partnerships was adopted, some forms of institutional ties of general interest. Local utilities are within municipal PPPs were concluded forming a partnership between a competence. The agreement on conferral, as an alternative municipality or a group of municipalities and a private to concession, is supposed to regulate mutual rights and partner. (Grubišić et al, 2015). obligations. The existing Law on Public Utility Activities (Article 9) Article 69 of the Law on Public Enterprises and Activities is the basis for conferral of performance of services, on of General Economic Interest, representing lex generalis in the basis of decision of the Assembly (city/municipal). The the matter of public sector enterprises, provides a means procedure of conferral of services is subject to the applica- of “securing the protection of general interest” authorizing tion of rules on public procurement and the general PPP the Government, the competent body of the province or a and concessions framework. Law on public-private par- city/municipality to give consent to the statute, guarantees tnership and concessions calls for the application of the and sureties, tariffs (safe when other law prescribed that provisions of the Law on public procurement108. In this another body grants consent), terms of supply of goods way these provisions indirectly form the constituent part and services, disposal of assets in state ownership, capital of the Law on public-private partnership. Amendments investment, etc. to the Law on PPP and concessions specify that service concessions are classified as the group of contracts awarded The Law on Utility Services106 further explains the compe- based on the Law on Public Procurement. tence for managing local utilities. Pursuant to the Article, the local self-government unit determines, in line with this Brief overview of the PPPs and concessions normative law, the conditions for performing communal services, framework

104 Official Gazette, Nos.129/2007 i 18/2016. 105 Official Gazette, Nos. 129/2007, 83/2014, 101/2016. 106 Official Gazette, Nos. 88/2011, 104/2016. 107 As prescribed in Article 28, the competent body of a local self-government unit gives consent to the proposal for price change. The proposal comprises the explanation of the rationales for price change and the detailed structure of the proposed price. The proposal has to be published at least 15 days before the competent body decides on price change. Alternatively, the Assembly of the city or municipality may determine the conditions for price change even before the consent of a competent body, if this is stipulated in the agreement on conferral of provision of services. 108 Official Gazette, Nos. 124/2012, 14/2015, 68/2015.

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The Law on Public Private Partnerships and Concessions Amendments to the Law on public-private partnership of 2011 was, obviously, drafted under the influence of po- and concessions, effective March 2016, have been intro- tential investors, and its rules enable a flexible approach to duced to secure a better control of fiscal risks in PPP pro- project financing. It may be claimed that the new regula- jects through the analysis of fiscal impact for project pro- tory framework is satisfactory to a larger extent (Radulovic posals exceeding 50 million EUR112. and Nenezic, 2012). This Law contains necessary rules (for example on surety instruments, step-in rights, etc.) recom- The effect of financial limits imposed on local mended by relevant international practice guides such is authorities the European PPP Expertise Center (EPEC) guide on PPP of the European Investment Bank109, Public-Private In terms of sources of financing, Serbian cities and muni- Partnership in Infrastructure Resource Center of the World cipalities may be divided into two groups (Nenezic and Bank, etc. The Law regulates the conditions and methods Radulovic, 2012:66). The first group comprises local self- for defining, proposing and approving the partnerships, government units which have reached the upper limits set defines the subjects authorized to propose and execute the out in the Law on Public Debt113. The other group is com- projects of public-private partnerships, the rights and du- posed of those entities with low credit capacity and status, ties of the public and private sector partners, the form and and to whom banks are not interested to lend, but could the content of the public contract (with or without the be interesting to international financial institutions and concession elements), the legal protection in the proce- development banks. Limiting factors for financing are also dure of awarding the public contract, the subject matter of related to low cash flows mainly due to limited govern- concession, as well as all other issues which are significant ment support, tariff policy. Therefore public utility com- for the realization of a public-private partnership. panies are more prone to short term financing. Further, the Law on Public Property imposes restrictions related to Public-private partnership is achieved in two ways and is surety. Namely, when assets are not treated as assets of an organized in two legal forms: contractual and institutional. enterprise, the public company is treated as the user of the Concessions form a special part of public-private partner- publicly owned assets (ownership by the state)114. Another ship. Article 20 stipulates that the public agreement shall limit is related to the lack of possibility of issuing a gua- be concluded as a public-private partnership agreement or rantee by local self-governance units, due to the Law on as a concession agreement. Duration of the public-private Public Debt. The last limitation could, to a certain extent, partnership project, i.e. concession, is limited to a maxi- be mitigated through the support agreement. When credit mum of 50 years. support or financing from own resources is not a viable option for a communal service provider, the PPP is an In July 2013, on the basis of the Law on PPP and option both for the local self-government unit, and the Concessions, the Commission for Public Private service provider owned by the municipality. Partnership adopted a Methodology for the Value for Money analysis in Public-Private Partnerships and Project proposals which have been awarded a positive Concessions110. This analysis should be obligatory when opinion (green light) by the Commission for PPPs the PPP does not have elements of a concession, but the same methodology should be used in a feasibility study Since March 2012, as of the date 21 February 2017, the for a PPP with the elements of concession, prepared by a Commission has evaluated around fifty proposals for PPPs public body. with or without elements of concession and has issued 44 positive opinions for PPPs with or without elements of In order to enhance the transparency of the granting pro- concession115. The following table (Table 1) shows that the cess and evidence of the public contracts, in June 2013 majority of positive opinions related to communal services, a Rulebook for the recordkeeping and content of public while only five were related to other infrastructure projects contracts register was adopted111. However, the general such as railroad concession, river port etc. Unfortunately, public opinion in Serbia is that the process of public ten- there is no official data about the exact amount of projec- dering and public contracts is not sufficiently transparent. ted and/or performed PPPs and concessions in Serbia.

109 The European PPP Expertise Centre, The EPEC PPP Guide available at: http://www.eib.org/epec/g2g/ 110 Available at: http://www.ppp.gov.rs/dok/38/Metodologija%20za%20analizu%20dobijene%20vrednosti%20u%20odnosu%20na%20 ulo%C5%BEeni%20novac%20u%20javno-privatnom%20partnerstvu%20i%20koncesijama.pdf 111 Official Gazette, No. 57/2013. 112 Local projects and the other small-scale projects still remain to be developed in a decentralized manner. However, the opinion of the Ministry shall be necessary only for PPP and Concession projects where the contracting authorities / public bodies proposing the project are under the governmental authority and if their value exceeds 50 million EUR. 113 Article 36, Law on Public Debt, Official Gazette Nos. 61/2005, 107/2009, 78/2011 and 68/2015. 114 Articles 19-20, Law on Public Property, Official Gazette Nos. 72/2011, 88/2013, 105/2014, 104/2016 – other law and 108/2016. 115 The full list of projects granted positive opinion is available at: http://www.ppp.gov.rs/dok/37/MISLJENJA%20KOMISIJE.pdf

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Table (1) Proposals which have been granted a green light by the Com- mission for PPPs116 construction of a mechanical biological treatment plant 121 Communal Services City/Municipality with refuse-derived fuel production . District Heating Zrenjanin, Niš, Batočina, Vrbas, Pirot The need to strengthen the institutional capacity for Waste Management Topola, Žagubica, Regional Center Keleš, private infrastructure initiatives Grocka117, Belgrade, Public Sewage System Stara Pazova As of the 1990s, the trend of decentralization and privati- Reconstruction zation of local communal services in Central and Eastern Public Transport (City or Loznica, Topola, Srbobran, Nis, Jagodina, Europe has been continuous, with legislation enabling Municipal) Šabac, Negotin, Paraćin, Belgrade118, Belgrade119, Kanjiža, Ruma contracting for service delivery just one among a num- Public Lighting Topola, Sečanj, Vrbas, Vranje, Varvarin, ber of determinants of successful project implementation. Žabalj, Ada, Beočin, Plandište, Bor, Petro- However, a stable regulatory framework, institutional vac na Mlavi, Kruševac capacity, transparency, and the competence and accoun- Maintenance of residential Novi Sad tability of public administration, including at the local buildings and institutions, level, are indispensable features in the agenda of priorities public lighting and chimney-sweeping120 for development policies and the transformation process Water distribution system Brus in post-communist economies (Laffont, 2005; Hodgson, and construction of a small 1998). Experiences in development aid show that streng- power plant thening administrative capacities and institution building Local railroad construction Stara Pazova is the key determinant in transition economies (Graham, and maintenance 2002). Among different levels of influence and the deve- Public Parking Garage Sabac lopment of PPP policies and projects, institutional sup- Other City/Municipality port represents one of the main preconditions of an effec- River port and Road Apatin tive PPP policy (Verhoest et al., 2014). One of the main Terminal problems in developing PPP projects in Serbia is the lack Railroad Concession E-763 Belgrade-Pozega of administrative capacity of local self-government units Building, reconstruction Belgrade even in the phase of formulating the potential projects. and maintenance of Belgrade Airport and the 122 airport operation Although a new Serbian Law on Investments has esta- Optical Network - Tele- Novi Sad blished a modern Serbian Development Agency, regional communications development agencies are not sufficiently involved in the Selected urban infrastruc- Belgrade development of instruments of financing local economic ture property development and private infrastructure financing. The problem of „missing middle“ (Shaw and Greenhalgh, Due to the lack of planning and appropriate risk manage- 2010) could be solved by a more active role of the asso- ment, some of the approved projects related to commu- ciation of cities and municipalities (Standing Conference nal infrastructure failed in realization, such is the District of Cities and Municipalities), and the strengthening of Heating PPP in the City of Zrenjanin, which was entered the network of cooperation among Serbian regional de- into without a proper feasibility study. Some important velopment agencies. Law on Investment mandated the infrastructure projects are in the pipeline, such as the offer creation of local economic development and investment for the selection of an operator for the Vinca waste landfill support units within the local self-government units, as part of a public-private partnership, currently one of the an entity authorised by the local self-governments, or a biggest projects of its kind in Europe. Due to the project’s dedicated project team to provide support to an investor complexity, in line with the Law on Public Procurement, investing in the development of communal and local „eco- the competitive bidding process had been launched and nomic infrastructure“. The role of the Serbian Chamber pre-qualification process for the assessment of qualified of Commerce, through its Office for Investment Support bidders is under way. According to the City Council of and Public-Private Partnership is worth mentioning, as Belgrade, eleven investors expressed their interest. The well as the efforts made by the National Alliance for Local project involves construction, operation and maintenance Economic Development (NALED), which represents an of a municipal waste treatment facility and foresees the association of companies, municipalities and civil society

116 Table has been based on the official report of the Commission for PPPs. www.ppp.gov.rs/dok/39/2016%20-%20%D0%98%D0%97%D0%92%D 0%95%D0%A8%D0%A2%D0%90%D0%88%20%D0%9E%20%D0%A0%D0%90%D0%94%D0%A3%20-%20%D0%88%D0%9F%D0%9F%20-%20 %D0%A4%D0%98%D0%9D.pdf 117 Co-generation, district heating. 118 Intra-city. 119 Inter-city. 120 All services proposed within one project. 121 http://balkangreenenergynews.com/eleven-offers-for-belgrade-landfill-ppp/ 122 Official Gazette, No. 89/2015.

oo NetworkNetwork Industries Industries newsletter Quarterly | || vol. vol.vol. 13 1819 | | | n°3nn 31 | |2014| 20162017 301830 organisations. sions may be transferred to users, and therefore proper mechanisms of consumer representation at the local level The functionality of PPP support institutions depends on and consumer protection should be developed (Jovanic, several criteria, among which the following are crucial: 2012). Preferably, a public agency overseeing the regu- political support, the competence of employees and well latory powers of local self-government units should be developed coordination mechanisms (Verhoest, 2014). established. Central PPP units may perform PPP policy formulation, technical support, the promotion of PPP and capacity References building, but may also green-light projects. Pursuant to 1. Hodgson G. Institutions and the viability of macroeconomics: some article 65 of the Law on Public Private Partnerships and perspectives on the transformation process in post-communist Concessions, a Commission for Public Private Partnership economies. Journal of Institutional Innovation, Development and is set up by the Government of the Republic of Serbia Transition, Vol. 2. 1998: 5-18. and is composed of nine representatives of relevant minis- 2. Graham C. Strengthening Institutional Capacity in Poor Countries: tries, the city of Belgrade and the Province of Vojvodina. Shoring Up Institutions, Reducing Global Powerty. Brookings The main role of the Commission is to give its opinion Policy Brief Series, April 2002: 97. on the PPP proposal, or the proposal of the concession 3. Jovanic T. A Conceptual Framework of Consumer Participation. agreement, after taking into account the opinion of the Network Industries Quarterly Vol.4. No. 4. 2012: 3-7. Ministry of Finance. 4. Jovanic T., Sredojevic S., Strengthening the Determinants of the Local Government Capacities for the Successful PPP The normative framework for PPP implementation, Implementation in the Western Balkans. In: A. Asquer, F. Becchis, which is wider than laws regulating PPP and concessions, D. Russollilo (eds.), The Political Economy of Local Regulation – should recognize the role of local administrations not only Theoretical Frameworks and International Case Studies, Palgrave as stakeholders in but also facilitators of PPP implementa- Macmillan, 2016: 237-254. tion (Jovanic, Sredojevic, 2016). In this sense, legislation 5. Nenezić D., Radulović B. The Analysis of possibilities and moda- in the western Balkans should better define the responsi- lities of financing and financial support measures to public-private bilities of local administrations and necessary procedures. partnerships in Serbia (Analiza mogućnosti i modaliteta finansiranja However, determinants of the local government capacities i mera finansijske podrške javno-privatnog partnerstva u Srbiji). needed for successful PPP implementation are not only set Quarterly Monitor, No. 13, July-September 2012: 62-71. out in laws and regulations, and a number of the types of 6. Grubisic Z., Musabegović I., Kamenković S. A Comparative expertise are required for PPP promotion and execution. Overview of Implementation of Public-Private Partnership Concept in Selected Countries of Central and Southeast Europe. Paper pres- Conclusion ented at the International Scientific Conference of IT and Business- Related Research Synthesis 2015. http://portal.sinteza.singidunum. This paper aimed to provide a general overview of the nor- ac.rs/Media/files/2015/481-485.pdf mative framework of public utilities of a local character in 7. Shaw K., Greenhalgh P., Revisiting the ‘missing middle’ in English Serbia, and to give some proposals on the reform, notably sub-national governance. Local Economy. No. 25. 2010: 457–475. the need to strengthen the capacities of the Commission 8. Verhoest K. et al. Policy commitment, legal and regulatory fra- for PPPs and the institutions providing technical sup- mework and institutional support for PPP in international compa- port, as private infrastructure investment represents one rison: Indexing countries’ readiness for taking up PPP. University of the pillars of regional development especially where the of Salzburg, Working Papers in Economics and Finance, No. 3, Vol. State, cities and municipalities have reached upper debt 2014. limits. Although during the last few years the normative framework has been upgraded and is mostly in line with EU requirements, investors are still not confident, projects and risk assessments not sufficiently elaborated, and local authorities not sufficiently educated about benefits, risks and negotiating procedures. All this leads to the conclusion that the presence of international financial organizations will be crucial for a successful implementation of large infrastructure projects. Public utilities of a local character, due to underinvestment during the previous two decades, are in urgent need of restructuring. The new legal framework is an impetus for liberalization, however, the regulatory powers of local self governments are underde- veloped, especially in the domain of economic regulation. Risks in public-private partnership projects and conces-

Competition and Regulation in Network Industries: a new Journal by Sage

Commencing in 2017 SAGE is delighted to be the new publisher of Competition and Regulation in Network Industries. We are building on the 16-year tradition and strength of the existing Intersentia Journal Competition and Regulation in Network Industries, yet strive to evolve it into an even higher quality journal, addressing the increasingly urgent challenge of governing (including regulating) complex and dynamic socio-technical systems (e.g., energy, transport, water, communication, urban systems), especially in light of pervasive digitalization. Network industries are caught between technological developments, evolving competition and regulation. At the same time significant innovations – especially in the field of ICTs – offer new opportunities for infrastructure operations and governance. Exploring this ombinedc technological and institutional dynamics between competition and regulation provides a fascinating field of research that challenges academics, managers and policy-makers alike. The new Journal Competition and Regulation in Network Industries is resolutely interdisciplinary in nature, favoring articles that combine economic, legal, policy and engineering approaches and seek to link theory with practical relevance. It is adouble-blind peer-reviewed journal that offers leading specialists opportunities to provide an in-depth and forward-looking view on the evolving network industries.

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Editor in chief: Prof Matthias Finger, École Polytechnique Fédérale de Lausanne and European University Institute

NetworkNetwork Industries Industries newsletter Quarterly | vol.| vol. 13 19 | n°3| no 1| 2014 | 2017 32 announcements

Network Industries Quarterly, Vol. 19, issue 2, 2017 (June) “Competition Policy in Energy Markets: The Experience of Emerging Economies”

The regulatory reform in developing countries took a prominent role in the 1990s. Both external and internal factors pushed many countries to liberalize their energy markets and introduce independent regulatory agencies to oversee the regulatory reforms. In the beginning, competition policy remained in the background. However, as liberalizations and regulatory reforms matured, competition policy has begun to come to the front. The advances such as technology and result-based tariff models also brought issues of anti- competitive behaviour in energy markets. While technological and economic advances shape the new market framework, the economic literature catches up with the evolution of energy markets. For example, the competition issues created by incentive regulation models still do not get the attention they deserve. This call for papers aims at contributing to the literature to close the gap, searching for academic contributions able to explore the major issues surrounding concurrent application of competition and regulation. The following are some of the issues we hope to address: • The tensions between competition policy and regulation in energy markets, • The evolution of tariff models and their relation to competition, • Major competition investigations in the industry in the EU and US, • Differing approaches to competition policy in both civil law and common law traditions, • How advances in technologies affect the role of competition policy, • The potential for deregulation in the energy markets.

Guest editor: Dr Fuat Oğuz The guest editor of this special issue on “Competition Policy in Energy Markets: The Experience of Emer- ging Economies” is Dr Fuat Oğuz (B.A.: Ankara University, M.A.: The American University, Ph.D.: George Mason University). Dr Oğuz works in the areas of competition and regulation. He published extensively on telecommunications and energy markets. Dr Oğuz has experience in the tariff models, regulatory policies, market analyses and regulatory impact analysis. Currently, he is a professor of economics at Yıldırım Beyazıt University. He teaches law and economics, economics of regulation and antitrust.

NetworkNetwork Industries Industries newsletter Quarterly | vol.| vol. 13 19 | n°3| no 1| 2014 | 2017 33 Network Industries newsletter | vol. 13 | n°3 | 2014 34